National warehouse storage rates are still high and are likely to stay high for the foreseeable future, although they did not increase quarter over quarter at the end of 2022, according to a Warehouse Pricing Index report highlighted by CNBC.
The background: In 2022, companies increased their inventories with the expectation that consumers would continue buying at the same higher levels.
- However, with a slower economy, high inflation and fewer stimulus dollars, consumers are not spending at the rates necessary to reduce inventories to a normal level anytime soon.
- As a result of this economic cooling, inventories are sitting in warehouses taking up space, which keeps warehouse prices high. This is forcing companies to mark down products drastically to keep them moving and decrease inventories.
Trade centers shift: There have also been significant changes in trade hotspots over the past several months, with port traffic continuing to move from traditional hubs in California like Long Beach and Los Angeles to Northeast ports like New York.
- “New York has been the nation’s busiest port for several months, surpassing California and threatening its long-held lead,” according to CNBC. “Shippers have moved away from ports including Los Angeles and Long Beach due to concerns about labor union and port management battles.”
- “A recent CNBC Supply Chain survey showed more logistics managers are concerned about moving trade back to the West Coast.”
The future: Company markdowns are pushing inventories to slowly trend downwards, although they are still high overall.
- Yet, even as inventories are slowly depleted and supply chains ease, warehouse storage prices are expected to continue trending upward. This is a result of the overall lack of space, high industrial real estate rents, elevated labor costs and a slowdown in new warehousing capacity due to the increased cost of capital.