Despite a warehouse boom, warehouses in America are running out of space : Planet Money : The Indicator from Planet Money Although there are more warehouses in the U.S. than ever before, these warehouses are running out of space. Today on the show, we go behind the scenes into the warehousing world to understand why warehouses are running out of space.

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This is THE INDICATOR FROM PLANET MONEY. I'm Darian Woods, and I'm here with NPR business correspondent Alina Selyukh.

Hey, Alina.


WOODS: You're here to take us on the world's most industrial adventure ride, I hear (laughter).

SELYUKH: I am calling it warehousing world.

WOODS: Fantastic.


WOODS: I hear it.

SELYUKH: Hear the sound of a seatbelt clicking on an - I don't know - a forklift maybe. I guess, we're riding a forklift today.

WOODS: Yep, yep, yep. So put on your earplugs. We are going on one of Disney's loudest and most juddering theme park rides.

SELYUKH: There are shelves and conveyor belts and robots and, literally, everything you've ever bought in your life, Darian.

DOUG KIERSEY: Your computer, your phone, your desk, your carpet, the ceiling tiles.

SELYUKH: That's Doug Kiersey. He's the president of Dermody Properties, which owns warehouses used by some of the country's largest retailers.

KIERSEY: It all came out of the greater distribution network.

SELYUKH: Or not coming out these days, I guess.

KIERSEY: It's not coming out as quickly as we'd like, is it?

WOODS: The supply chain crisis. And warehouses are a key link in the supply chain. They're moving goods from manufacturers to store shelves.

SELYUKH: This country has more warehouses right now than ever. And yet, they are overflowing. They're running out of space.

KIERSEY: It's like nothing we've ever seen. I've been doing this for 38 years. It's unprecedented.

WOODS: And a lot of this, of course, has to do with the pandemic - skyrocketing consumer demand for goods, production challenges making those goods, bottlenecks transporting them.

SELYUKH: Definitely, but there's also more to the story that long predates the pandemic.

WOODS: Today on the show - why America's warehouses are bursting at the seams.

SELYUKH: A tale that stretches far before the current crisis.


WOODS: Alina, you were saying that our adventure ride through the story of warehousing in America right now actually begins before the pandemic.

SELYUKH: Yes. The pandemic upset a delicate equilibrium for warehouses that long preceded COVID.


SELYUKH: Our ride begins in a pre-pandemic world a few years ago.

KIERSEY: Our business runs, generally, at about 93% to 96% occupancy nationally. Even in the great financial crisis, it dipped below 90% only briefly. So there's not a lot of slack in the system to begin with.

WOODS: Warehouses - pretty full even before the pandemic.

SELYUKH: And to be clear, when Doug says, like, 96% occupancy, that doesn't necessarily mean it's just, you know, packed with actual stuff. It just means that space has been claimed - maybe, like, a department store paid rent to reserve that space. So even if it sits empty and another store needs some space urgently, that space is not available.

WOODS: OK. So it sounds like they're running their system at a pretty tight rate.

SELYUKH: Definitely. Warehouses already were busier than ever. In fact, the supply of warehousing space has been kind of barely keeping up with the demand for warehousing space for years.

WOODS: If Americans are known for one thing, it's buying a lot of stuff.

SELYUKH: We shop a lot. And if you think about what it takes to supply that space to keep all of that shopping stored, making new warehouses is not a quick thing. And the kind of warehouses that are now in huge demand are also the trickiest ones to build today.

KIERSEY: Say, 10 years ago, our business - the business of developing logistics real estate - was really a business of, hey, let's go find the next corn field out in the exurbs, go align ourselves with the next interchange on the freeway, and that's where we'll build a big building.


SELYUKH: So here we are on our adventure ride. We're watching warehouses rise out of the ground alongside highways. We start way out of town in the exurbs, but now our ride scoots closer and closer to the city because that is where the hottest warehousing market is now right.

WOODS: I mean, a lot of people are not quite used to having their stuff delivered within a day or two. So retailers want to store their stuff closer to people, so that they can actually offer faster shipping.

KIERSEY: So instead of building a lot of big buildings way out in the exurbs, our customers now are saying, we want urban logistics locations, and we want close-in suburban locations. We want more and smaller, more adaptable buildings. And it's taking a while for the business to adjust itself to that new reality.

SELYUKH: Think about how huge of a change that is. Cities and suburbs are expensive. They are more crowded.

WOODS: And, of course, we know residents have a lot of opinions about buildings in their neighborhood. They want their shopping to get there quick, but they also don't want to live next to a giant, windowless warehouse all of the time. In California, one city tried to impose a 45-day moratorium on building new warehouses.

SELYUKH: And so, in recent years, stores have been pretty judicious in how much inventory they want to keep at a warehouse at any given moment. Space is money, literally, so they've been choosing to only stock items right before they expect to sell them.

WOODS: So, like, major supplies of shovels right before a snowstorm or extreme amounts of hotdogs right before the Fourth of July.

SELYUKH: When the pandemic hit, everything, all of what we've been seeing so far, got turned upside down.


SELYUKH: Our adventure jolts to a stop right here. We're halting.

WOODS: All right. I'm lifting up my safety bar.


SELYUKH: We're halting right alongside the rest of the world as the pandemic begins. And things start closing - factories, ports, but also stores. People are cutting back on shopping, and so stuff begins piling up.

WOODS: And then when everything reopens, you get a rush of more stuff flooding in.

ZAC ROGERS: Warehouses are already sort of full. And now they're really, really full.

SELYUKH: That's Zac Rogers. He's a supply chain management expert from Colorado State University.

ROGERS: And you can see, every month for the last 18 months, there's been less available warehouse space than there was the month before. It's actually sort of a heroic effort in a doomed cause, kind of.

SELYUKH: This is where you get the jammed-up supply chain story - not enough warehouse workers, truck drivers, rail cars. And the main thing - you know this one.

WOODS: A lot of shopping, I've heard. But, you know, you can't go out as much and do things in crowded, unventilated spaces. So we are filling that hole by buying stuff.

SELYUKH: In an average year, online shopping might grow 10% or 15%. In the first pandemic year, it jumped over 40% and only kept going. So companies see that, and they start importing at record levels month after month after month.

WOODS: And they're doing it to bring stuff into the U.S. as much as they can while they can because they've seen what factory and port disruptions can do, whether they're here or in China or in Malaysia. They don't want to risk this happening again.

ROGERS: Essentially, you kind of see this doomsday-prepper mentality in all of these companies where, normally, they've been as lean as possible. And so there's swelling their inventory levels up in anticipation of demand because we're not sure about how quickly you can do transportation. And that, in turn, is totally flooding warehouses.

SELYUKH: And so we see the warehousing world explode. Rents in some markets double in a matter of a year. Usually, a new building takes almost a year to sell out. Now people like Doug Kiersey are selling space in buildings that aren't even built yet.

WOODS: They're cranking out warehouses as fast as they can. It was actually the only type of commercial construction that boomed through the pandemic. But remember - the high-tech space that everyone wants in cities and suburbs - that's super limited.

SELYUKH: Doug Kiersey he told me at one point he had to do something unheard of - turn away an old client as three companies vied for the same warehouse, 1 million square feet. It had sat vacant. And suddenly, three tenants urgently wanted in.

WOODS: I mean, that sounds like a nice problem to have.

SELYUKH: Except for the part where he's now got some extremely unhappy clients, and for the part where those problems' ripple effects are expected to stretch far into this year - so, you know, a roller coaster.


WOODS: Thanks very much, Alina, for that very insightful roller coaster ride - a little bit frightening, but I ended in one piece.


WOODS: This episode of THE INDICATOR was produced by our senior producer Viet Le with help from Gilly Moon. It was fact-checked by Taylor Washington. THE INDICATOR is edited by Kate Concannon and is a production of NPR.


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