LOUISVILLE, Ky. — With the supply chain not keeping up with consumer demand, the U.S. industrial real estate market is booming. The vacancy rate for the warehouses that produce, store, and distribute goods and products is at a record-low of 3.6%, according to the latest data from CBRE, an international commercial real estate services and investment firm.
In Louisville, HTI Logistics has a 135,000-square-foot facility (approximately the size of 2.3 football fields), with 100,000 square feet of usable storage space. Due to supply chain issues within the automotive industry, largely caused by the global chip shortage, HTI Logistics is at 110% capacity, and the owner told Spectrum News 1 Kentucky that it can’t store any more goods.
With higher than normal online spending amid continued global supply chain issues, over capacity and not enough space to keep up are two issues that many warehouses in the U.S. are facing right now.
HTI Logistics’ warehouse has 100,000 square feet of storage space to store raw materials that customers send to them. When those goods arrive, they get sorted and distributed to auto manufacturers around the Midwest region. To help out with in-house manual labor, two 30-ton cranes load customers’ goods on to and off of trucks.
However, HTI Logistics owner William “Billy” Hill told Spectrum News 1 that it’s not enough because its warehouse in Louisville is beyond capacity.
“So we try to keep it around 90% so we can kind of work with last-minute issues that customers have, but, right now, we are at about 110% capacity,” Hill explained.
The 53-year-old also owns Hill Transportation Services, Inc. (HTSI), a Louisville-based trucking company. Hill said he has been in the trucking industry for 26 years and in the warehouse business for eight years.
“I started off with one truck. We are up to 96 tractors, [semi-tractor-trailer truck], and two warehouse facilities today,” Hill said.
His two companies, HTSI and HTI Logistics, work together to pick up loads from customers, store and move those goods into and out of the warehouse, and then deliver to other customers receiving the goods.
“Mainly it’s steel; there’s some aluminum that we supply, but a lot of it is steel material that goes into any piece of a vehicle that you can think of,” Hill said.
“We handle Honda, Subaru, Hyundai, Toyota, Nissan, General Motors, Ford material. We handle every automaker that are out. This part is going to go to some processor somewhere to help create a vehicle that one day will be on the road.”
Even though the global chip shortage has slowed down car manufacturing, Hill explained companies that make the raw materials, like steel and aluminum, for the auto industry are still producing it because they want supply to be ready when the chip shortage ends.
Hill told Spectrum News 1 that HTSI and HTI Logistics are moving about 60% of the materials they once did, which means this warehouse has filled up fast.
“When we talk about inflationary numbers, that’s part of it, right. We are spending more to hold stuff till we can use it. So, no, it’s not free,” Hill said, regarding a part of what's causing rising inflation.
“It’s kind of like a big game of Tetris. It really is. You’re kind of fitting all of this in here together,” said HTI Logistics Operation Manager, Brandie Coulter. He has worked at the Louisville-based warehouse for eight years, and he said he's never seen the space this packed.
“Right now, we’re kind of pulling the loads as we, as we move along, as a truck shows up,” Coulter explained. “Say, you know, when we were running [at] 90% [capacity], we would have probably 100% of our load staged and ready to go. Right now, we’re staging maybe 20% to 25% of the material, due to the space.
Normally, there are three loading docks for trucks at the warehouse so goods can easily be unloaded and loaded off of and onto trucks. Now, there is only one because the other two loading docks are being used to store more materials since storage capacity scarce. Hill told Spectrum News 1 it used to take 30 minutes to load a truck. Now, it takes 45 to 55 minutes.
“We just have to rotate inventory now. We can’t take any more in or any extra in. We are as full as we can be,” Hill said.
Nine months ago, HTI Logistics purchased a bigger warehouse, about 200,000 square feet, in East Chicago, Ind. Hill said the plan was to have the warehouse run at no more than 40% capacity to work out workflow kinks given it has just opened. However, it’s currently at 70% capacity, given the continuous influx of raw materials from steel mills and aluminum manufacturers but a reduced outflow of those same materials since car manufacturing has slowed to a crawl.
The million dollar question, Hill said, is when the global supply chain issues will end. The new COVID-19 variant, Omicron, he said, adds another layer to the answer.
“We don’t know what tomorrow’s going to bring. We don’t know how that’s going to affect our supply chain going forward. This could last well into 2023. So we just go forward each day and try to make it better.”