Does the Midwest Have Enough Workers for Its Industrial Operations?
Columbus, Des Moines and Cincinnati led the growth rate over the last five years.
U.S. e-commerce sales surpassed the $1 trillion mark in 2022. Moreover, they’re expected to rise by 10%-11% annually through 2027.
And where do the packages wait before they’re sent out for delivery? In big warehouses and distribution centers where space is needed, along with staff to manage the incoming and outgoing cycles.
Specifically, when it comes to e-commerce sales, for every $1 billion of such sales, an additional 1.25 million square feet of distribution space is needed. So, a one million-square-foot e-commerce facility may require up to 1,000 employees at peak periods.
A big part of these sales is processed in the Midwest, according to CBRE Research, which recently looked at the area’s industrial numbers. That’s been good news for facilities and employment, the latter growing at an average 3.9% since 2012 and adding almost 348,000 employees. Altogether, the Midwest has an average distribution labor score of 101, according to CBRE’s Labor Analytics Group, with that number slightly ahead of the national average and 12 of the 21 Midwestern markets studied surpassing the average.
In fact, Midwest employment grew to record levels following the pandemic, soaring 15% between 2019 and 2022. Looking back over the last five years, though, it grew 19.9% and 41% over the last decade and over the last 12 months, it has normalized to a modest 0.7% growth. Meanwhile, even though leasing activity has slowed from the record levels in 2021 and 2022, demand from prospective tenants remains high. Key demand is coming from food and beverage, home improvement, third-party logistics and online fulfillment.
Altogether, the Midwest has posted 880 million square feet of positive net absorption and delivered 746 million square feet of new industrial space since 2012. T&W employment in the Heartland hit 1.1 million. With anticipated expansion of operations in these groups, skilled and affordable labor will be needed to get the jobs done.
Three markets did exceptionally well and exceeded a 30% T&W employment growth rate over the last five years. Columbus was at the top with 49.8%, Des Moines at 46.4% and Cincinnati at 32.7%.