Collaborative Logistics Comes to the Warehouse
With many major markets squeezed, companies are using new technology that helps them work together to match unused space with goods
Industrial real-estate experts say vacancy rates in some markets are vanishingly small, but some unused space can be put to work with Airbnb-like short-term rentals. PHOTO: BLOOMBERG NEWS
Raj India Trading Co. found itself with a happy problem when it switched from importing bulky flower planters to smaller cremation urns: plenty of empty space at its warehouse in the Seattle suburbs.
Warehouse space comes at a premium in Seattle, where the vacancy rate is just 5.6%, according to CBRE Inc., a real-estate brokerage. With several more years left on its lease, Raj started renting out small sections of its floor on a month-to-month basis using Flexe Inc., an online service that pairs warehouse owners with companies that need space.
“It just offsets some of what I pay out of pocket for rent,” said Jeff Lykins, Raj’s owner.
It also helped several companies who had exceeded their storage capacity and needed a place to stash extra goods. Raj’s imports have shared shelves with pallets of toys, auto parts and ramen noodles. This type of arrangement is known as “collaborative logistics”—that is, when companies work together to maximize efficiency in their supply chains, rather than operating in isolation.
‘Effectively, there’s almost nothing available in Southern California’
Collaborative logistics is an emerging trend in transportation, where companies share trucks to reduce fuel costs and speed delivery in congested urban areas. As vacancy dwindles in the warehouse market, the same idea is being applied to storage space.
With a strong dollar and U.S. consumption improving, more goods are entering the U.S. and vacancy rates for industrial real estate—which consists mostly of warehouse properties but also includes office and manufacturing facilities—are at historic lows. In some parts of Southern California, where much of the nation’s containerized cargo lands from Asia, industrial real estate vacancy has stayed well below 5% this year.
“Effectively, there’s almost nothing available in that market” for a company looking to rent a warehouse, said David Egan, head of industrial research at CBRE.
But Mr. Egan and other analysts say there’s plenty of unused space in warehouses that have already been leased. For instance, seasonal businesses like camping equipment, Halloween costumes or holiday décor need extra space only at specific times of the year. Much of that room goes unused the rest of the year, analysts say.
“In aggregate I think there’s enough warehouse space,” said Dwight Klappich, a supply chain analyst with research firm Gartner Inc. Businesses can collaborate, he said, but they need the right technologies.
Flexe, the service Raj used to rent out its spare warehouse space, operates similarly to Airbnb. It hosts a website that pairs warehouse tenants with extra space and companies looking for temporary storage. The service is popular with companies looking for unconventional arrangements, such as to handle a large volume of returns, a product recall or other unexpected events, said Chief Executive Karl Siebrecht.
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Flexe launched in 2013 and now works with 85 facilities in 20 U.S. markets, Mr. Siebrecht said. It receives a commission from the company renting out space on each lease.
Flexe is a relatively new entrant in a competitive field. Third-party logistics companies have long specialized in solving short-term capacity issues by offering space at their facilities. There are also plenty of real-estate brokers who can arrange subleases for extra space nearly anywhere.
The startup’s owners say their technology offers more options than a third-party logistics firm because they work with so many warehouse tenants. Plus, capacity isn’t capped as it might be at a 3PL facility. As for brokered subleases, Flexe argues its deals are quicker and simpler, as many warehouses traditionally only accept leases for six months or longer.
Mr. Lykins of Raj India Trading said he’s now at full capacity.
“I couldn’t fit another pallet in my warehouse if I had to,” he said.
