Co-warehousing has many benefits for businesses of all sizes, ranging from more affordable pricing to luxury amenities for employees. Conventional warehouse real estate can be highly limiting, requiring long leases at high costs. With co-warehousing, businesses can benefit from more flexibility and use their warehouse space more efficiently.
Co-warehousing significantly expands the range of pricing options available for those looking to rent warehouse space. Conventional leases typically require tenants to rent hundreds of square feet or an entire building and last for a five-year term.
While this works fine for some businesses, it can make warehouses too expensive for others. With co-warehousing, businesses can get shorter leases and rent less space. For instance, a startup could rent 200 square feet for six months to test run a distribution strategy.
This pricing model allows businesses to pay for exactly what they need. Many small businesses have to use garages or self-storage facilities because warehouses are too large and costly for their budget. Co-warehousing addresses this problem by making warehouse space more accessible and affordable.
The co-warehousing pricing model also makes it more resilient to fluctuations in the logistics industry. From 2020 through 2022, the U.S. experienced a severe shortage of warehouse space, with historically low vacancy rates. In 2023, things are shifting in the opposite direction as demand for warehouse real estate shrinks.
The market could continue to rise and fall like this for the foreseeable future. As industry expert Marc Wulfraat explained in an interview, the “risk of being out of stock for the holiday season has caused retailers to build up more inventory earlier in the year, driving up the need for more domestic storage capacity.”
Co-warehousing is one of a growing number of changes retailers are making to adapt to supply chain delays. It offers access to short-term leases for things like seasonal inventory. It also enables new levels of agility for businesses that can help them evolve their operations to overcome modern challenges.
Co-warehousing increases the flexibility of warehouse usage, cost and square footage. Warehouses are typically used for storage, but these spaces are great for many other applications. For instance, a startup could assemble a small office and workshop in the corner of a warehouse.
Since co-warehousing splits up warehouses into numerous small chunks, tenants can use the space more efficiently and creatively. This strategy is more cost-effective for everyone and optimizes the use of every square foot. Designing an effective layout for warehouse space is all about balancing budget and needs, which vary significantly from one business to another.
Co-warehousing provides a flexible framework where businesses of all sizes can get exactly the amount of space they need for their unique needs. Those needs can range from a small workshop for a few people to a large storage space for overflow inventory or a versatile office space. With co-warehousing, businesses don’t need to settle for a one-size-fits-all approach.
More businesses can get a foot in the door, which is good for everyone in the supply chain. In particular, co-warehousing could help support local supply chains and a shift to domestic partners.
For example, a small manufacturer might be the perfect local supplier for another business, allowing them to transition away from costly international partners. Co-warehousing gives that small manufacturer the flexible space they need to effectively support the supply chain. Since their warehouse space is coming at an affordable cost, the manufacturer also isn’t forced to raise prices on their goods, saving their partners and end customers money.
One of the most exciting benefits of co-warehousing for the supply chain is a high degree of scalability. This is one of the biggest advantages co-warehousing has over conventional warehouse leases. The combination of short-term leases and flexible square footage makes it exceptionally easy for businesses to upscale or downscale as needed.
For instance, a retailer might need 1,000 square feet of overflow storage space during the holiday season but only 500 square feet the rest of the year. They could get custom lease terms to fit these exact needs.
Similarly, a small business might start out with only 300 square feet of warehousing space. If the business has a good year and grows, it can purchase more space in the same warehouse as needed. Co-warehousing is particularly beneficial for small businesses because it allows them to grow at their own pace without straining their budgets.
The easy scalability co-warehousing offers can even help logistics companies and retailers boost their order fulfillment times. Surveys show over half of all 3PLs today can fulfill orders in 90 minutes or less. Customers are increasingly looking for this kind of ultra-fast order fulfillment, due in large part to Amazon’s rapid service.
Co-warehousing can help businesses meet customer expectations by allowing them to quickly adapt their distribution spaces on an as-needed basis.
For example, a retailer could have five small co-warehousing spaces around a certain city to act as local distribution centers. If one part of the city saw an increase in demand for same-day delivery, the retailer could update their lease to add more space at that specific local distribution center.
With conventional warehousing, businesses are somewhat limited by what they can do with a single centralized warehouse space. This could mean slower fulfillment times for customers further from that one location. Co-warehousing allows businesses to grow in the unique way that best fits their needs and their customers’ expectations.
Co-warehousing is transforming the way warehouse spaces look, feel and operate by offering luxury amenities for tenants. Much like co-working office spaces, co-warehousing companies often equip their warehouses with common areas, coffee bars, comfortable break rooms and more luxuries.
For example, one co-warehousing company, Portal, offers all tenants access to shared logistics equipment, loading docks and office spaces. Tenants also get private space within the shared warehouse. This provides a good mix of social and community spaces, functional shared spaces and private areas for each individual tenant.
Luxury amenities are by no means necessary for success, but they can significantly improve the employee experience. They also diversify the ways tenants can use their warehouse space. This development could unify businesses that might otherwise be spread between an office and distribution center.
With co-warehousing, every department’s needs can be met in one space, fostering community and collaboration. As a result, amenities can support higher productivity and improved communication, both of which are vital for a resilient supply chain.
Co-warehousing is transforming the logistics real estate market, creating more flexibility, versatility and scalability. Tenants can get shorter leases and smaller spaces that fit their exact needs. This makes warehouse space more accessible and affordable, offering support for the small businesses, manufacturers and suppliers that form a vital part of the supply chain.
With co-warehousing, businesses of all sizes can quickly adapt to rapidly changing supply chain challenges. Rather than being tied to one large warehouse, they can use smaller co-warehousing spaces to provide a better customer experience. Ultimately, co-warehousing could revolutionize the way warehouses are rented and utilized, shaping the future of logistics.
Emily Newton is the Editor-in-Chief of Revolutionized. She regularly covers trends in the industrial sector.