JLL Analysts See DC Surge in Midwest

Shortage of DC labor in the U.S. to growth in DC leasing/construction activity in "secondary" Midwestern markets.

By Patrick Burnson

February 24, 2017

While traditional domains for DCs (Central Pennsylvania, Dallas–Fort Worth and the Inland Empire) remain very active, Industrial real estate firm JLL has discovered that there is a growing shift to secondary Midwestern markets.

Indianapolis, Columbus, Cincinnati and St. Louis have all seen a spike in e-commerce deals over the past 24 months.

A new report indicates that each now ranks in the top 10 nationally. Indianapolis, in particular, has seen the e-commerce sector account for 61.2 percent of “big-box” activity during this time frame.

In a nutshell, it links the shortage of DC labor in the U.S. to growth in DC leasing/construction activity in “secondary” Midwestern markets.

While central location is a major factor in the rise of these Midwestern cities, so too are e-fulfillment labor demand and wage implications, says JLL.

In an exclusive interview with SCMR, executives noted that with “big-box” leasing around the country continuing to flourish and unemployment rates steadily reaching new lows, continued wage growth for warehouse associates is expected to outpace many other employment sectors.

This trend, they say, puts upward pressure on overall total landed costs.

“These findings were not much of a surprise,” says Walter Kemmsies, Ph.D.,JLL’s Managing Director, Economist and Chief Strategist. Given the fact that more goods must be held in more locations, we expect to see a shift in logistics.”

Matt Powers, JLL’s vice president of retail ecommerce, agrees, and shared this observation of wages and salaries:

“There’s been a ‘ripple effect’ in compensation for logistics managers,” he says. “As lower-wage workers are becoming better paid, those in management are expecting to earn more, too.”

Having just returned from the annual meeting of The Retail Industry Leaders Association (RILA), both men noted a state of heighted concern about “pure play” e-tailing competition.

“For the first time, we say a heightened awareness among retailers to share more information about their business models, and cooperate to a great extent in the coming years,” says Powers.