Changes in U.S. Economy Drive Brisk Project Activity for Distribution Centers, Server Farms

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Amazon.com Incorporated (NASDAQ:AMZN) (Seattle, Washington) pledged last week to create 100,000 new jobs over the next two years, many tied to the retail giant's dramatic expansion of its national fulfillment network. Amazon's investment is part of a trend that shows continued strong project activity in the distribution centers and warehouses segment of the Industrial Manufacturing Industry.

Amazon is building fulfillment centers across the nation: in Texas, California, Florida, New Jersey, Illinois, Kentucky and its home state of Washington. These projects will add to the distribution centers and warehouses Amazon has built in recent years. Industrial Info's North American Industrial Platform shows Amazon has built 15 fulfillment centers across the country since 2014, and another eight more are scheduled to be built this year.

And it's not alone. Changes in the economy, technology and consumer expectations have driven years of heavy project activity in the Distribution Centers & Warehousing segment of the Industrial Manufacturing Industry. This year, construction is scheduled to begin on 135 distribution centers and warehouse projects in the U.S., valued at about $7 billion, according to Industrial Info's North American Industrial Platform. The states with the highest level of construction activity are:

• Texas, with 22 project valued at about $995 million
• Tennessee, with six projects valued at roughly $809 million
• California, with 16 projects worth approximately $702 million
• Florida, with 17 projects valued at about $591 million
• Pennsylvania, with four project valued at roughly $448 million

Industrial Info also is tracking 52 other planned projects in this sector, valued at $4 billion, which are scheduled to kick off construction in 2018 and beyond.

This planned project activity follows several years of brisk project activity in the U.S. Last year, 146 distribution center and warehouse projects valued at $4.97 billion were scheduled to be completed. In 2015, 148 projects with total investment value (TIV) of $6.18 billion were completed in the U.S.

Many of those completed and proposed construction projects are for fulfillment centers that will be owned and operated by companies like Amazon, United Parcel Service (NYSE:UPS) (Sandy Springs, Georgia) and FedEx Corporation (NYSE:FDX) (Memphis, Tennessee). The growing demand for those centers reflect broad cultural and economic changes in the U.S.

David Pickering, Industrial Info's vice president of research for the Industrial Manufacturing Industry, noted the rapidly growing role of e-commerce in U.S. industry: "Fewer and fewer people shop at malls anymore, which is why Macy's, The Limited, Sears, K-Mart, Office Depot and other national retail chains are closing stores."

"Social media and technology advances have gone beyond 'just in time,' " he continued. "Today, people want it right now, if not yesterday! Drone-based delivery is coming closer and closer to reality. All of these trends are squeezing bricks and mortar retailers, while creating new opportunities for online retailers and logistics companies, leading to more distribution facilities to meet the changing expectations of customers."

Another trend driving the economy--cloud-based computing--also is driving project activity in the distribution center and warehouse segment. Many of the biggest-ticket projects in this segment are data centers, also known as server farms, which allow technology companies like Microsoft Corporation (NASDAQ:MSFT), Facebook (NASDAQ:FB) (Menlo Park), Apple Incorporated (NASDAQ:AAPL) (Cupertino, California) and Alphabet Incorporated (NASDAQ:GOOG) (Mountain View, California), formerly known as Google, to store data and support cloud-based computer applications.

"In the same way that desktop computers gave way to laptops, in recent years laptops have been displaced by notebooks, which use cloud-based software," Pickering said. "All of those apps and all of that data need to be stored somewhere. Increasingly, it's in the cloud."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.