CRBE on Global Warehouse Rents
What are the most expensive locations for warehouse space across the globe?
Real estate firm CRBE's research arm recently released its top 10 list of rent rates compiled based on year-end 2015 data, and currency exchange rates at that time.
No US metro regions in that top 10 list, but Los Angeles/Orange County came in at number 12, and perhaps surprising the next highest US area for warehouse rents was Houston, at number 17.
Supply Chain Digest Says... |
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| Walmart has managed to get many of its thousands of suppliers to sign new contracts that include more fees to move products through Walmart's warehouses and earn shelf space in new stores. |
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The full top 10 is as follows:
1. Hong Kong: $28.94
2. Tokyo: $16.74
3. London: $16.36
4. Singapore: $10.91
5. Stockholm: $9.90
6. Shanghai: $9.44
7. Manchester/Liverpool: $8.75
8. Leeds/Sheffield: $8.45
9. Sydney: $8.34
10. Shenzhen: $8.27
However, US metro markets were well represented in the top 10 for growth in rental rates, led by the Oakland, where rates were up almost 30% in 2015 to put it in the top spot for growth year over year. The other US markets in the top 10 were New Jersey, California's Inland Empire, LA/Orange Country, Dallas and Atlanta.
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But even with the 6.8% increase last year, Atlanta was still at the bottom of the CRBE list of 68 markets, with rental rates of just $3.13 per square foot, barely below number 67 Dallas ($3.76) and number 66 Chicago ($4.13). All three areas still have abundant land available for DC construction, keeping rates low.
Walmart's Success in Getting Vendors to Accept DC Handling Feeds
It was widely reported last year that Walmart had sent letters to thousands of its vendors demanding new fees for products that move through its distribution network.
 That move in 2015 was part of several actions Walmart has recently taken with vendors in an attempt to shore up its profitability through more payments or concessions. At the time, news publications such as Reuters and the Wall Street Journal reported anonymous Walmart vendors as saying they would not pay the new fees, which amount to a sort of logistics handling charge probably not seen before in the retail industry.
Is it working for Walmart? Maybe. The Wall Street Journal reported in June that according to vendor interviews and documents its reporters reviewed, "Walmart has managed to get many of its thousands of suppliers to sign new contracts that include more fees to move products through Walmart's warehouses and earn shelf space in new stores."
One exception: Procter and Gamble, which resisted the terms in a series of tense meetings, the Journal reports.
P&G executives are said to have emphasized how it had invested in a network of “mixing centers,” large distribution centers from which P&G can ship its full portfolio of products quickly to a larger number of retail locations, reducing the cost of Walmart's supply chain.
While Walmart maybe collecting the fees from other vendors now, in the end it seems those costs will be reflected in higher prices from the vendors. We have not heard of any other retailers trying this approach.
US Retailers Should be Thankful there is No Groceries Code Adjudicator Here
If you have been following the news, there have been a series of scandals in the UK over the past few years relative to retailers there - largely in the grocery sector - abusing suppliers through dramatically extended payment terms, forced payments of various kinds, and other offenses.
For example, in early 2015 there were numerous reports that UK grocers were stretching out payments to suppliers to extreme levels, causing dozens of food manufacturers to go under. That news led later to changes to the country's payment code that pressured retailers to pay vendors in 30 to 60 days maximum. Tesco, the largest UK grocer, announced changes that will speed up payments to many of its suppliers near the end of Q1 last year.
The “payment code” referenced above is serious, and there is a governmental organization – the Groceries Code Adjudicator (GCA) - to enforce it. Just recently, the GCA released a report relative to the practices of another UK grocery chain, Morrison's, quoting emails the company sent to suppliers asking for funding to support the cost of investment in areas such as staffing in its stores.
In one email, Morrison's legal team had offered to help "construct arguments that are credible" to justify the demands to suppliers. One vendor alone was asked was for payment of two million pounds - ouch!
The GCA said the events were now more than a year old, and the company has since taken swift action to address the practices. It seems unlikely we will see a GCA type office here in the US, but if demands on suppliers get too extreme, who knows.
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