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  June 18th, 2024 | Written by

Rising Warehouse Wages Propel Demand for Automation: ITS Logistics Q2 Report

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ITS Logistics has released the Q2 US Distribution and Fulfillment Index, in collaboration with Cresa. The latest index highlights a significant increase in the National Industrial Real Estate Vacancy Rate, which reached 6.2% in Q2, up from 5.7% in Q1. This rise is accompanied by an unprecedented availability of warehouse space since the onset of the pandemic in 2020. Concurrently, increasing warehouse wages are driving a surge in the demand for technology and automation to curb labor costs.

Read also: Optimizing Warehouse Automation: Understanding Key Considerations

Ryan Martin, President of Assets for ITS Logistics, noted the sharp wage increase: “Wages have escalated to a regional average of $18.99, marking a 40-50 percent rise over the past five years. Not long ago, starting wages for warehouse employees ranged from $12 to $14 per hour. As wages rise, employers face pressure, which in turn fuels the demand for technology and automation in warehouse operations.”

A recent report by Gartner underscores the growing importance of warehouse automation in modern logistics. The global warehouse automation market is expected to reach $71.01 billion by 2032, growing at a compound annual growth rate (CAGR) of 15.91% from 2023 to 2032. Asia/Pacific is projected to lead this growth.

The Q2 index also highlights how rising wages, influenced by inflationary pressures, are intensifying competition for talent in key regions. Federal and state incentives are attracting manufacturing to these areas, further increasing the demand for higher-paying jobs and pressuring general warehouse positions. Regions like Reno, Los Angeles, and Chicago have seen average wages rise to $18.99, outpacing the Consumer Price Index (CPI) in many areas, with some experiencing even higher increases.

According to the National Retail Federation’s (NRF) 2024 June Monthly Economic Review, the economy is currently growing, with inflation moderating as consumer spending supports underlying momentum. The NRF review suggests that the rest of the year will largely depend on inflation rates, job growth, and the Federal Reserve’s decisions. The University of Michigan’s Consumer Sentiment Index rose to 79.4 in March, indicating a 28.1% increase from March 2023 and a 13.92% rise from December 2023.

Martin added, “The improvement in Consumer Sentiment is a highly encouraging indicator for businesses. Retail sales saw a 0.7% increase in March, seasonally adjusted from February, and a 4% year-over-year unadjusted rise. This growth benefits retailers and includes services.”

ITS Logistics offers comprehensive network transportation solutions across North America and provides omnichannel distribution and fulfillment services to 96% of the U.S. population within two days. Their services encompass drayage and intermodal solutions at 22 coastal ports and 30 rail ramps, a complete suite of asset and asset-lite transportation solutions, and outbound small parcel services.

The ITS Logistics US Distribution and Fulfillment Index monitors the Producer Price Index (PPI) for Warehousing and Storage and provides a regional market overview to help optimize warehousing and delivery costs. Each quarter, the index highlights all major US markets. For a comprehensive copy of the index with forecasts for the US distribution and fulfillment sector, visit the ITS Logistics website.