Coworking and office sharing are common in today’s business world. Both types of arrangements give entrepreneurs and small businesses the chance to have a professional setup without needing to purchase real estate or commit to expensive leases. Spawned by the pandemic, some companies have left traditional corporate offices behind for good and moved to a permanent office-sharing arrangement for all their employees.
With many different types of professional and virtual spaces now available, coworking represents only a fraction of the wider space-sharing movement. Thanks to the rise of e-commerce, warehouses have become more important to many companies’ operations, making co-warehousing an increasingly popular option in today’s workforce.
Co-warehousing is a practical solution that allows companies that need to store inventory or equipment a chance to do so without having to purchase or lease an entire facility. It also saves companies from needing to invest in building infrastructure for their products and employees.
Here is a closer look at co-warehousing and the benefits it can bring to investors and companies of all sizes.
Why is co-warehousing important now?
In the simplest terms, co-warehousing is when multiple companies use the same warehouse space. Businesses can opt into a shared warehouse and use the facilities needed for storage without having to purchase an entire building or lease it on the owner’s terms.
Co-warehousing is a growing trend, but it is still niche compared to the coworking sector. Nonetheless, there is plenty of data to show that the need for storage space is increasing, as it is becoming more difficult for smaller companies to find places to keep their inventory.
E-commerce is driving the competition for storage space. In 2021, the U.S. saw $870 billion in online retail sales. This was a 14.2% increase from 2020 and a 50.5% jump from 2019. Meanwhile, real estate firm JLL noted a 46% increase in leasing by logistics and distribution companies between 2019 and 2021.
With this high demand for warehouse space, big companies have a distinct advantage over smaller firms with limited capital. They can buy up all the space or outbid smaller competitors when leasing. Co-warehousing gives smaller firms a place to store inventory without having to compete with the lease offers of e-commerce giants.
What are the advantages of co-warehousing?
Though it can level the playing field for smaller businesses, co-warehousing brings unique benefits to companies of all sizes.
- An environment for new connections and opportunities
Like coworking spaces, co-warehouses provide opportunities to interact with like-minded entrepreneurs who are engaged in the same type of business. This community environment can lead to connections, partnerships, and new opportunities that can help businesses grow.
Moreover, these relationships can extend to include collaborations with shipping, delivery, or supply services that work with the other tenants in the warehouse.
- Added operational flexibility
Young businesses often fail because they make mistakes related to scalability and expansion. For example, an e-commerce company might purchase or lease a warehouse even though it won’t use most of the space. Or, the company decides to save money by utilizing a smaller warehouse space and quickly grows out of it, stunting development and forcing operations to slow or halt while moving to a larger building.
Co-warehousing allows companies to pay for only what they currently require and add space incrementally as they grow. This can be particularly crucial if a business only requires storage space on a seasonal basis. Short-term co-warehousing commitments make it possible to get shelf space as needed rather than paying for an entire year.
Since co-warehousing agreements require a shorter commitment, this flexibility can also work if companies need to downsize. This is an advantage in times of uncertainty, when supply and demand are difficult to predict and when logistical issues can force quick changes to business models.
- Shared costs and services
Co-warehousing also provides businesses with other (sometimes expensive) necessities that they might otherwise overlook. For example, indoor air quality is a necessary but often overlooked aspect of warehouse operations. A shared warehouse will already have the necessary ventilation and protections in place so company owners can be sure that the space is safe and healthy for employees. These features also ensure compliance with workplace health and safety laws.
Other necessary systems, such as fire suppression, are also taken care of, as are climate controls that can help business owners maintain proper conditions for inventory.
Is it wise to invest in co-warehousing spaces?
Does co-warehousing offer the same opportunities to investors as other shared workspaces? Some industry players think so. Real estate investment platform Fundrise is betting on co-warehousing growth. It spent $130 million to acquire properties to help startup Saltbox add warehouse space in 15 different locations around the country.
Meanwhile, the 2022 Warehousing and Global Storage Market Report projects a compound annual growth rate (CAGR) of 8.3% in 2026. That would bring the current global value of the warehouse market from $601.68 billion (2021) to $906.4 billion. It appears that the upward trajectory of the warehousing market will continue after the COVID-19 pandemic.
Co-warehousing is here to stay as an important solution for e-commerce companies and other businesses that need flexible, cost-effective inventory storage solutions. It is also bringing new investment opportunities for those who want to profit from the increase of interest in flexible workspaces.