Part and Parcel: Surging e-commerce means warehouse and distribution center construction is booming

By Claire Swedberg | Jun 15, 2023
Warehouses1_spread_shutterstock_1281316903 [Converted]
The traditional warehouse market has been uprooted by the changing nature of retail business and consumer behavior.




The traditional warehouse market has been uprooted by the changing nature of retail business and consumer behavior. This includes a rise in new projects, an increase in the size of many buildings and greater power demands. Modern commerce requires more warehouses with greater functionality than ever before, and electrical contractors are helping build systems that can manage the flow of goods today and in the future.

It all boils down to the demand to get goods where they’re needed, fast. More warehouse locations allow products to be staged and delivered from sites closer to customers. Automation helps goods flow through each warehouse with fewer workers and greater speed.

Companies are preparing for more changes ahead, such as a trend toward electric vehicles—even tractor trailers—that will need charging when they sit idle.

Warehouse construction is following a record low warehouse vacancy rate of 2.9%, explained James Breeze, vice president and global head of industrial and logistics research for CBRE, Dallas, a commercial real estate and investment company. This has prompted record high development in logistics-based construction, he pointed out.

According to Kevvin Miller, CBRE’s director for Americas consulting and supply chain, overall storage vacancy rates are at a record low due to demand for industrial products since the onset of the pandemic. Since March 2020, over 2 billion square feet of industrial warehouse space has been leased.

“This demand has led developers to significantly increase new construction,” Miller said.

At the end of the third quarter 2022, Miller said, 661 million square feet of warehouse space was under construction, with nearly 30% of that already leased.

Most of that work is taking place in very specific geographic areas. However, “there are just five markets that contain over 33% of product under construction,” Breeze said. These areas are Dallas­-Fort Worth (with 65.0 million square feet), Atlanta (44.3 million square feet), California’s Inland Empire (37.8 million square feet), Phoenix (35.2 million square feet) and Indianapolis (33.8 million square feet). 

“Development is robust in these markets because they are strategically located with close proximity to large populations or major logistics hubs,” he said.

These are not small projects. Over 93% of the buildings under construction are facilities sized 100,000 square feet and above.

They can be highly expensive for developers. Food storage buildings are typically four to five times as costly as traditional warehouses, requiring temperature and climate control. They also often need to meet FDA and OSHA guidelines to help protect inventory from the environment, rodents and contaminants.

The pandemic has been behind much of the disruption affecting warehouse construction today. According to a Cushman and Wakefield report in 2022, the demand for warehouse space was higher than the supply in the first quarter of that year.

The e-commerce business boom expedited the need for quick turnaround on order fulfillment and warehousing services, and subsequently increased the demand for warehousing space. The increased demand coupled with the lack of space created a perfect storm that is driving the construction of new warehouses and the associated skyrocketing costs.

Building automation is expanding

It’s not just Amazon or carriers such as UPS and FedEx building smart logistics sites and warehouses. Retailers and other companies with high distribution capacities are experiencing labor shortages and limited space; they would benefit from automation and improved efficiency.

“In retail, wholesale and e-commerce product types, we are seeing constant growth and evolution of automation requirements and alternatives,” said Tripp Eskridge, CBRE’s Americas industrial and logistics project management director, advisory. 

Direct-to-consumer fulfillment and shipping norms of next-day and same-day (and subsets of same-day) delivery have significantly reduced the amount of time companies have from the point-of-order when the order ships out. These orders, combined with wholesale, retail and other types of distribution needs under the same roof, add to the already complex order profile, Eskridge said.

Picking orders with single unit, case and pallet quantities, combined with multiline and mixed service levels, requires complex solutions, he added. Depending on SKU counts and volumes, the automation and storage alternatives from goods-to-person, including automated storage and retrieval systems and other sortation systems, are becoming the norm to help mitigate risk of flexibility, throughput—and most importantly—labor demands.

Automation also requires coordination of logistics systems, including a distributed order management system, transportation management system and warehouse management system, “as well as the floor controls for automation in a warehouse controls system,” Eskridge said. “As these systems get more advanced and can drive autonomous decisions, automation can become more efficient and cost effective for a better business case and overall payback.”

This FedEx facility in Maspeth, N.Y., is designed to accommodate an entire electrical service for an EV fleet.


Low-voltage installations for data also are getting more critical. Warehouse facilities need access to information. A typical warehouse space dedicates about 1%–5% for office, so a 500,000-square-foot warehouse would typically have 5,000–25,000 square feet of office data demand for 50–250 office staff.

However, the production areas for warehousing and distribution require significantly more reliable data for connectivity to operational requirements from receiving, storage, order management and outbound order fulfillment. Automation adds another layer of performance, as the speed at which orders and data must be processed requires high uptime and availability of all key systems to flow and generate useful transactions.

B&G Electrical Contractors of New York Inc.

B&G Electrical Contractors of New York Inc., North Amityville, N.Y., is helping companies meet demands for DC space and logistics intelligence in the New York metropolitan area. In the past few years, the company has provided electrical construction for new warehouses in the sectors where growth is underway—retail, industrial and carrier services.

Projects have included a new warehouse for Sysco Foods on Long Island; a speculative two-story build for an investment property that would serve future tenants (ultimately FedEx will occupy that space); and a last-mile facility built directly for FedEx, said Jim Giorgio, B&G Electrical president and CEO.

“There’s demand for that type of property [logistics and warehouses],” he pointed out, much of it based on online purchasing or direct-to-consumer orders, which have become the norm in the New York area and beyond.

B&G sees the trend firsthand with its construction contracts. Giorgio noted the increasing complexity of warehouse construction and the demand for power to manage them. These facilities require robust electrical systems for redundancy, automation and future-proofing. The high-capacity demands mean today’s warehouses need a lot of power, along with redundancy, often including multiple generators.

Because logistics centers and warehouses are vital to ensuring goods are routed, sorted and transported efficiently, power failures can’t happen. 


Because logistics centers and warehouses are vital to ensuring goods are routed, sorted and transported efficiently, power failures can’t happen. Most warehouse systems require expensive switchgear packages and heavy-duty electrical distribution for high-speed, often complex sortation systems, as well as energy for refrigeration or freezer space in the case of food storage. 

B&G’s project at the Sysco Foods distribution facility on Long Island was design-build. The facility is built to support dry and cold food storage, with power to chill a 100,000-square-foot freezer. The electrical contractor completed construction in 2016.

Workers from B&G Electrical Contractors install underground conduit at 2505 Bruckner Blvd. in the Bronx.


The second project—a speculative construction for a private developer—included a 1.2 million-square-foot space at 2505 Bruckner Blvd. in the Bronx, N.Y. The two-level facility has storage on the lower floor, and space for fleet parking above. It also has two parking garages for employees.

The third project was contracted by Skanska for FedEx in Maspeth, N.Y., for the package-moving company’s own use. The future demand for electric vehicle fleets will require power connections that keep large vehicles charged for long and heavy transit. Like some other DC facilities, the FedEx project is designed to accommodate an entire electrical service for an EV fleet. That required overhead busway systems so power feeds could drop down from the overhead system to create charging stations. The new distribution center is expected to be completed in June 2023.

“You could go to the skyline of the city and see a high-rise that you built, and that’s nice, but at the end of the day we look at every project as a success if the client was happy with what we did—I want to know we put together a good job,” Giorgio said, and ultimately, “if it was financially successful. These are the kinds of results I look at.”

On an overall market level, more advancements could include sustainability efforts.

“We do see an increase in power demand for greater implementation of automation and mechanization,” Breeze said. At the same time, however, “we are seeing a significant increase in environmental, social and governance (ESG) targets.” Many companies are focusing on a 2030 target to accomplish ESG goals, and real estate is a key component. “That means that reducing environmental carbon footprint impacts site selection, sustainable design metrics, green energy providers and more.”

Note: For more on warehouse technology, check out “On the Market: Packing and Tracking,” Electrical Contractor, February 2021.

shutterstock / vectorpouch / B&G Electrical Contractors of NY Inc.

About The Author

SWEDBERG is a freelance writer based in western Washington. She can be reached at [email protected].





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