Regulatory compliance, tech advances, and consumer demand will spur 8% growth in eco-friendly warehousing and transportation services over the next 10 years, report shows.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
While the overall commercial real estate industry is under duress with banks and other lenders seizing control of distressed commercial properties at the highest rate in 10 years, there are signs of recovery in the industrial market. Supply is abating, and demand and rental rates are increasing in most U.S. markets. Leading this rebound is the logistics sector which, by and large, has avoided the worst fallout brought about by high interest rates and economic uncertainties.
On the financing front as interest rates stabilize, investors who have been sitting on mountains of cash are starting to spend their money, and the logistics sector continues to be the favored sector of commercial real estate. By contrast, lending volumes across most other real estate assets, especially the ailing office market, have dropped significantly. Rental rate growth in the warehousing sector has also remained relatively strong, adding to its appeal for investors. While more modest than last year’s 20.6% jump in warehouse rental rates, this year’s increase is projected by BizCosts.com to be 7.9%, translating into a national average asking rate of $10.49 per square foot.
New leases, new construction, and improved financials by several key logistics players are clear signs that the warehousing sector is well in the lead of the industrial real estate comeback. Here are some key logistics players and what they are doing to signal that warehousing’s rebound is well underway.
Amazon is back in the market in a major way and is again buying and leasing warehousing properties after undertaking a pause in expansion over the past 18 months. The e-commerce giant has leased, bought, or announced plans for some 20 million square feet of new warehouse space in the U.S. this year, including deals for two distribution warehouses of 1.0 million square feet each in California’s Inland Empire, where vacancy has been on the rise.
Walmart, now the nation’s largest grocer, is constructing a series of new high-tech warehouses around the country as part of a strategy to grow and make its online grocery business more efficient using robotics. Store pickup of groceries and home delivery drove the company’s 22% e-commerce gains in the U.S. during its latest quarter.
Prologis—the San Francisco-based developer—serves as another indicator that warehouse demand is on the upswing. The world’s largest warehouse operator has increased its financial outlook for the year on the heels of a surge in new leasing activity, including major deals with Home Depot and with Amazon.
Warehousing growth sectors
While demand in general is up for warehouses and distribution centers, there are two notable growth areas: the pharmaceutical industry and retail and office conversions.
The pharmaceutical industry is experiencing a major increase in the approval of cell and gene therapies, which require an entirely new level of control and speed in shipment and storage. Many of these therapies have a shorter lifecycle than traditional pharmaceuticals and require a controlled environment to protect them from temperature fluctuations, humidity, light exposure, and contamination.
Today, about one-third of all pharmaceuticals are transported by air, and that amount is on the upswing. This trend is not going unnoticed by warehouse developers, who are planning new and expanded logistics parks serving the aviation and pharmaceutical sectors. In Southern New Jersey, the Los Angeles-based Industrial Realty Group is breaking ground on a 3.5-million-square-foot logistics park next to the Atlantic City International Airport with great demand expected to come from the hundreds of major pharmaceutical companies operating in New Jersey and Eastern Pennsylvania. Similarly, in North Carolina, the state recently allotted $350 million of taxpayer funds to the NC TransPark in Kinston. This facility is planned to complement the state’s huge $41.8 billion pharmaceutical industry, which relies heavily on climate-controlled warehousing and air transport.
Other high-growth warehousing sectors include retail and corporate campus conversions. In particular, former regional mall sites and outdated suburban office parks are being redeveloped into warehouse facilities, leveraging their good highway access and shovel-readiness in terms of utilities and site preparation.
Corporate campus conversions are being seen in states with transitioning economies. For example, many of the pharmaceutical companies located in Connecticut have migrated to New Jersey or the Carolinas. Their former signature corporate sites—like Bristol Myers Squibb’s campus in Wallingford and Sanofi’s research and development center in Meriden—are now slated for major warehouse conversions.
Geographic shifts
Source: BizCosts.com, 2024
Another key trend affecting the warehousing market is a geographic shift in terms of where companies are looking to locate new facilities.
For example, companies, job creators, and wealth are continuing to exit California at record levels due to the state’s high taxes and difficult regulatory climate—all of which have an especially big impact the warehousing sector. The state’s new $20 minimum wage for fast-food workers is only the latest bill to create challenges for warehousing operators, who are being forced to increase wages and benefits to remain competitive. Regulators fined Amazon nearly $6 million under California’s Warehouse Quotas Law for failing to give written notices to its warehouse workers of any productivity quotas that apply to them, as well as explanations of any discipline they may face in failing to meet them.
California’s difficult business climate along with a significant shift of cargo back to West Coast ports due to disruptions from the Suez Canal and Panama Canal is generating a high level of interest in alternative warehouse locations in the Western United States.
A 2024 Boyd Co. site selection report identified a series of top warehouse sites in 11 Western states. Selected locations are smaller market cities on or proximate to major interstate highways, which have attractive industrial sites and a precedent for successful warehouse operations. Annual operating costs for these 20 Western cities are ranked in the Figure 1 and range from a high of $15.6 million in Otay Mesa, California, near San Diego, to a low of $12.3 million in Minden, Nevada. Minden is a popular landing spot near Lake Tahoe for companies leaving California’s costly Bay Area that has prime, shovel-ready warehouse sites.
Another geographic shift involves responding to the rise in nearshoring, as companies from around the globe move their operations closer to the U.S. to minimize extended supply chain risks. Mexico has become the top destination for nearshoring, and, for the first time in more than 20 years, has passed China as the leading importer of goods into the United States. Nuevo León, bordering Central Texas, has become the leading destination in Mexico for nearshoring. The state has attracted some $50 billion during the past year in new manufacturing investment, most near its capital of Monterrey.
The SH 130 Corridor in Central Texas—which links the high-growth Austin and San Antonio markets with Monterrey via superior highway and rail access—houses one of the hottest logistics markets in the country. Texas’ State Highway 130 was built as a high-speed alternative to I-35—one of the most congested interstates in the U.S. and notorious within the logistics community for heavy traffic, frequent accidents, and costly delays. Central Texas counties served by SH 130 are attracting significant new warehouse investment spurred by nearshoring as well as by demand generated by massive new investments by Tesla’s Gigafactory and numerous other new plant startups in the region.
These geographic shifts and developing growth markets are indicative of the dynamic and constantly evolving nature of the warehousing market. The sector’s strategic responses to nearshoring, regulatory pressures, and economic uncertainties are setting the stage for continued growth and transformation. Investors and industry stakeholders alike would be wise to keep a close eye on the market.
For example, millions of residents and workers in the Tampa region have now left their homes and jobs, heeding increasingly dire evacuation warnings from state officials. They’re fleeing the estimated 10 to 20 feet of storm surge that is forecast to swamp the area, due to Hurricane Milton’s status as the strongest hurricane in the Gulf since Rita in 2005, the fifth-strongest Atlantic hurricane based on pressure, and the sixth-strongest Atlantic hurricane based on its peak winds, according to market data provider Industrial Info Resources.
Between that mass migration and the storm’s effect on buildings and infrastructure, supply chain impacts could hit the energy logistics and agriculture sectors particularly hard, according to a report from Everstream Analytics.
The Tampa Bay metro area is the most vulnerable area, with the potential for storm surge to halt port operations, roads, rails, air travel, and business operations – possibly for an extended period of time. In contrast to those “severe to potentially catastrophic” effects, key supply chain hubs outside of the core zone of impact—including the Miami metro area along with Jacksonville, FL and Savannah, GA—could also be impacted but to a more moderate level, such as slowdowns in port operations and air cargo, Everstream Analytics’ Chief Meteorologist Jon Davis said in a report.
Although it was recently downgraded from a Category 5 to Category 4 storm, Milton is anticipated to have major disruptions for transportation, in large part because it will strike an “already fragile supply chain environment” that is still reeling from the fury of Hurricane Helene less than two weeks ago and the ILA port strike that ended just five days ago and crippled ports along the East and Gulf Coasts, a report from Project44 said.
The storm will also affect supply chain operations at sea, since approximately 74 container vessels are located near the storm and may experience delays as they await safe entry into major ports. Vessels already at the ports may face delays departing as they wait for storm conditions to clear, Project44 said.
On land, Florida will likely also face impacts in the Last Mile delivery industry as roads become difficult to navigate and workers evacuate for safety.
Likewise, freight rail networks are also shifting engines, cars, and shipments out of the path of the storm as the industry continues “adapting to a world shaped by climate change,” the Association of American Railroads (AAR) said. Before floods arrive, railroads may relocate locomotives, elevate track infrastructure, and remove sensitive electronic equipment such as sensors, signals and switches. However, forceful water can move a bridge from its support beams or destabilize it by unearthing the supporting soil, so in certain conditions, railroads may park rail cars full of heavy materials — like rocks and ballast — on a bridge before a flood to weigh it down, AAR said.
Imports at the nation’s major container ports should continue at elevated levels this month despite the strike, the groups said in their Global Port Tracker report.
To be sure, the strike wasn’t without impacts. NRF found that retailers who brought in cargo early or shifted delivery to the West Coast face added warehousing and transportation costs. But the overall effect of the three-day work stoppage on national economic trends will be fairly muted.
“It was a huge relief for retailers, their customers and the nation’s economy that the strike was short lived,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a release. “It will take the affected ports a couple of weeks to recover, but we can rest assured that all ports across the country will be working hard to meet demand, and no impact on the holiday shopping season is expected.”
Looking at next steps, NRF said the focus now is on bringing the International Longshoremen’s Association (ILA)—the union representing some 45,000 workers—and the United States Maritime Alliance Ltd. (USMX) back to the bargaining table. “The priority now is for both parties to negotiate in good faith and reach a long-term contract before the short-term extension ends in mid-January. We don’t want to face a disruption like this all over again,” Gold said.
By the numbers, the report forecasts that U.S. ports covered by Global Port Tracker will handle 2.12 million twenty-foot equivalent units (TEU) for October, which would be an increase of 3.1% year over year. That is slightly higher than the 2.08 million TEU forecast for October a month ago, and the strike did not appear to affect national totals.
In comparison, the August number was 2.34 million TEU, up 19.3% year over year. The September forecast 2.29 million TEU, up 12.9% year over year, November is forecast at 1.91 million TEU, up 0.9% year over year, and December at 1.88 million TEU, up 0.2%. For the year, that would bring 2024 to 24.9 million TEU, up 12.1% from 2023. The import numbers come as NRF is forecasting that 2024 retail sales – excluding automobile dealers, gasoline stations and restaurants to focus on core retail – will grow between 2.5% and 3.5% over 2023.
Global Port Tracker, which is produced for NRF by Hackett Associates, provides historical data and forecasts for the U.S. ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Port of Virginia, Charleston, Savannah, Port Everglades, Miami and Jacksonville on the East Coast, and Houston on the Gulf Coast.
The warm waters of the Gulf of Mexico are brewing up another massive storm this week that is on track to smash into the western coast of Florida by Wednesday morning, bringing a consecutive round of storm surge and damaging winds to the storm-weary state.
Before reaching the U.S., Hurricane Milton will rake the northern coast of Mexico’s Yucatan Peninsula with dangerous weather. But hurricane watches are already in effect for parts of Florida, which could see heavy rainfall, flash and urban flooding, and moderate to major river floods, according to forecasts from the National Oceanic and Atmospheric Administration (NOAA).
As it revs its massive engines with fuel from the historically warm Gulf of Mexico, Hurricane Milton could possibly hit Tampa as a Category 5 storm, according to the FEWSION Project at Northern Arizona University, which tracks supply chains throughout the country.
With that much power, Milton could shut down the port and seriously disrupt the fuel supply into western and central Florida, which could then hinder recovery efforts. That’s because fuel supplies for much of Florida, especially central Florida, arrive from Texas and Louisiana through the Port of Tampa. That means that anyone who depends on generators or fuel for critical functions should plan for an extended period without access to fuel. And recovery crews and logisticians should consider bringing their own fuel when responding to the storm, FEWSION said.
One of those disaster recovery efforts will be led by nonprofit group the American Logistics Aid Network (ALAN), which is already mobilizing its forces for Hurricane Milton, even as it devotes other energy to the Hurricane Helene response. “In an ideal world we’d have plenty of time to focus all of our efforts on Hurricane Helene clean-up and recovery,” Kathy Fulton, ALAN’s Executive Director, said in a release. “But in the real world, major hurricanes don’t always wait for their turn. As a result, we are officially activating for Hurricane Milton.”
In the meantime, many weary residents of the region are thinking of moving to another part of the country instead of getting hit by vicious storms several times a year. Nearly one-third (32%) of U.S. residents aged 18-34 say they’re reconsidering where they want to move in the future after seeing or hearing about the damage caused by Hurricane Helene, according to a survey commissioned by real estate brokerage Redfin.
“Scores of Americans flocked to the Sun Belt during the pandemic because remote work allowed them to take advantage of the region’s relatively low cost of living. Some thought Appalachia was insulated from hurricane risk, not realizing that the area is prone to flooding and that hurricanes can sometimes cause flash flooding far away from the ocean,” Redfin Chief Economist Daryl Fairweather said in a release. “Americans are beginning to realize that nowhere is truly immune to the impacts of climate change, and we’re starting to see that impact where people want to live—even people who haven’t experienced a catastrophic weather event firsthand.”
The report is based on a commissioned survey conducted by Ipsos on Oct. 2-3, fielded to 1,005 U.S. adults. After making landfall in Florida in late September, Hurricane Helene wreaked havoc across Appalachia, becoming the deadliest storm to hit mainland America in almost two decades. In North Carolina, the death toll has surpassed 100 and the city of Asheville has been devastated.
Shippers and carriers at ports along the East and Gulf coasts today are working through a backlog of stranded containers stuck on ships at sea, now that dockworkers and port operators have agreed to a tentative deal that ends the dockworkers strike.
In the meantime, U.S. importers and exporters face a mountain of shipping boxes that are now several days behind schedule. By the latest estimate from Everstream Analytics, the number of cargo boxes on ships floating outside affected ports has slightly decreased by 20,000 twenty foot equivalent units (TEUs), dropping to 386,000 from its highpoint of 406,000 yesterday.
To chip away at the problem, some facilities like the Port of Charleston have announced extended daily gate hours to give shippers and carriers more time each day to shuffle through the backlog. And Georgia Ports Authority likewise announced plans to stay open on Saturday and Sunday, saying, “We will be offering weekend gates to help restore your supply chain fluidity.”
But they face a lot of work; the number of container ships waiting outside of U.S. Gulf and East Coast ports on Friday morning had decreased overnight to 54, down from a Thursday peak of 59. Overall, with each day of strike roughly needing about one week to clear the backlog, the 3-day all-out strike will likely take minimum three weeks to return to normal operations at U.S. ports, Everstream said.