Top 20 Warehouses 2023: Demand Soars, Mergers Slow

The U.S. economy may have taken a breather in 2023, but demand for warehouse and industrial space remained high throughout the year.

This had a positive impact on North American third-party logistics (3PL) companies that offer storage, logistics, fulfillment and/or transportation solutions to a range of different organizations.

Cold chain 3PL providers that serve this market that’s expected to grow from $67 billion in 2022 to over $104 billion by 2028, according to a report by IMarc, were in especially high demand throughout the 12-month period.

“Cold chain warehousing is an area that’s experiencing a period of unprecedented growth, especially with the rapid expansion of online grocery shopping caused by the pandemic,” says Evan Armstrong, CEO at Armstrong & Associates. “And while temperature-controlled warehouses comprised a small portion of the overall U.S. industrial market, e-commerce, population growth and evolving consumer behaviors during and post-pandemic have significantly increased the space demand from 3PLs serving the food industry.”

Top 20 North American Warehousing 3PLs

(Rank based on 2022 warehousing square footage within North America*)

*Square footage is company reported or Armstrong & Associates, Inc. estimates.
Copyright © 2023 Armstrong & Associates, Inc.    

Top 20 North American Refrigerated Warehousing Companies

Source: International Association of Refrigerated Warehouses (IARW)

Higher Than Expected Growth

According to commercial real estate services and investment firm CBRE’s mid-year real estate review, industrial and logistics leasing surpassed expectations in 2023, with total activity expected to reach 750 million square feet for the year.

“While higher-than-expected rent growth in emerging markets could push overall rent growth to just under 15% for the year, vacancy rates will increase more than initially expected, as tenant requirements continue to lag behind new construction completions,” CBRE points out.

Armstrong credits the e-commerce boom with “changing the landscape” of 3PL warehousing over the last few years. Nearly every major trend in warehousing—a tight labor market, adoption of new technologies, increased rents, low vacancy rates and increasing demand—all equally affect private and outsourced e-commerce warehousing.

“3PLs are adapting to this changing landscape by being agile, flexible, innovative and resilient,” Armstrong explains.

As one of the fastest-growing 3PL segments, e-commerce takes up more warehouse space and is more labor intensive. Warehouse operators are using increased automation and robotics to eke out additional cost and efficiency at a time when the labor shortage, rising wages and the “Amazon Effect” continue to present new challenges.

“Some 3PLs at our recent 3PL Value Creation North American Summit noted customized warehousing services such as engraving and embroidery in the warehouse as a competitive differentiator to Amazon,” says Armstrong. “Companies will likely continue outsourcing (versus building their own internal fulfillment operations) as their e-commerce sales grow. A lot of shippers that 3PLs work with are examining their supply chain networks and providers to improve inventory management and on-time delivery performance. We anticipate continued focus on
supply chain network flexibility and warehouse optimization.”

Switching Places On The Chart

Each year, Armstrong compiles an annual list of the top North American warehousing companies. Each company has either provided square footage information or enough public information for the research firm to make a reasonable estimate of size.

While Amazon’s estimated 254.6 million square feet of 3PL space would technically top the chart, Armstrong & Associates doesn’t give the company an official ranking for this reason.

The top 10 companies on Armstrong & Associates’ list of Top 20 North American Warehousing 3PLs shuffled around a bit in 2023. DHL Supply Chain North America held onto the top spot with 156.6 million square feet across 515 warehouses followed by Ryder Supply Chain Solutions (No. 3 in 2022) with 300 locations and 95 million square feet; GXO Logistics with 78 million and 294 square feet; NFI with 70 million square feet and 152 warehouses; and Lineage Logistics (No. 8 last year) with 303 locations and 60 million square feet of space.

A newcomer to the top 5, Lineage Logistics has made nearly 90 acquisitions since its founding 15 years ago. Armstrong says the square feet the company currently has doesn’t include its most recent acquisition of eight cold storage facilities covering nearly 1.3 million square feet from Burris Logistics.

“This will narrow Burris’ focus on its food service distribution [Honor Foods] and freight management [Trinity Logistics] businesses going forward,” Armstrong says.

Rounding out this year’s top 10 were GEODIS North America (No. 5 in 2022) with 53.3 million square feet and 146 warehouses; Americold (No. 7 last year) with 39.3 million square feet in 195 locations; FedEx Logistics (No. 11 in 2022) with 38.8 million square feet and 90 warehouses; Kenco’s 38.7 million sf across 111 locations; and Saddle Creek Logistics Services, with 31 million square feet and 80 locations. The latter two companies maintained their positions on the chart.

Kintetsu World Express (No. 21), which had the last spot on the list last year with a North American warehousing footprint of 15 million square feet, missed the top 20 this year. E-commerce fulfillment-focused Radial grew its North American warehousing space, which is mostly in the United States, by more than 15% over the last two years to 16.6 million square feet.

“This accomplishment landed Radial a spot, just making the list, coming in at 20th,” says Armstrong. “E-commerce fulfillment remains one of the fastest growing 3PL market sub segments. Excluding Amazon, we estimate the U.S. 3PL e-commerce market saw a five-year compound annual growth rate of 29.8% from 2017 to 2022.”

M&A, Tech And Future Outlook

Although merger and acquisitions (M&A) continued to be strong in the first half of 2022, that pace has since slowed. By the end of 2022, Armstrong & Associates tracked 17 large 3PL acquisitions (those with purchase prices over $100 million) versus 2021, which saw the highest number (25) of large 3PL purchases since the company began tracking them in 1999.

Fast forward to the first half of 2023 and the number of transactions dropped to four, following the broader trend of much lower M&A activity across the board this year. Although none of these acquisitions were in the U.S. value-added warehousing and distribution (VAWD) market, the largest purchase was made by U.S. investment firm Kohlberg Kravis Roberts (KKR) which acquired all outstanding shares of Japan’s Hitachi Transport System (HTS) for $5.2 billion in March 2023.

With automation, advanced technologies, robotics and artificial intelligence (AI) all increasingly being used in the warehousing environment, VAWD 3PLs have also seen an increase in the level of functional sophistication provided by their warehouse management systems, Armstrong says. Some of the key functions that VAWD 3PLs are using advanced technologies for include inventory management, order picking, labor management, warehouse utilities, shipping and replenishment.

“More specifically many 3PLs invested in cloud robotics that help improve efficiency, accuracy and picking speed,” says Armstrong. “By accessing real-time data and analytics from the cloud, these robots can optimize their routes, reduce idle time, reduce human transport/travel time and prioritize tasks based on demand.”

Looking ahead, Armstrong says he believes VAWD 3PLs will continue to do well given the general lack of warehousing space—which is nearing a critical level in the cold chain—plus ongoing growth in both e-commerce fulfillment and last-mile delivery.

“We anticipate the U.S. VAWD market, which saw a compound annual growth rate of 9.4% from 2016 to 2022, to grow by 7% this year,” Armstrong adds. “At this point, it appears that VAWD will be the highlight of all four segments in 2023.”

Cold Chain 3PL Trends

Each year, the International Association of Refrigerated Warehouses (IARW) publishes its North American Top 25 List of the largest refrigerated warehousing and logistics providers in Canada, Mexico and the United States.

The list is determined by total capacity—in millions of cubic feet—of temperature-controlled space operated by IARW warehouse members. The IARW is part of the Global Cold Chain Alliance (GCAA) with two other associations and one foundation. The IARW is the third-party temperature-controlled warehousing industry’s association.

“There were pretty big year-over-year changes to the organization’s list of Top 20 North American Refrigerated Warehousing companies,” said Adam T. Thocher, senior vice president of global programs and insights at the Global Cold Chain Alliance.

And while the overall slowdown in M&A activity did impact the sector, the significant amount of capacity in development during the 2020-2022 timeframe, plus a number of new market entrants, drove substantial growth in the cold chain sector.

“Globally and in North America, we saw entrants to the cold storage market, some coming in on the North American and Global Top 25 listings,” says Thocher. “As this year has continued and we prepare an updated ranking for 2024, we’re expecting these new entrants to grow capacity and facilities and [we also] expect some new networks to emerge.”

This year, Lineage Logistics topped the cold chain warehouse list and is followed by Americold Logistics, United States Cold Storage, Interstate Warehousing and FreezPak Logistics. The only change in the top five year-over-year was the addition of FreezPak and the removal of Versacold from the chart (the company was acquired by Lineage Logistics in 2022).

The top 10 also included Conestoga Cold Storage, Congebec Logistics, NewCold Holdings, RLS Partners and Nor-Am Cold Storage. These rankings largely mirrored 2022’s list with the exception of RLS Partners, which was rebranded in 2023 and Nor-Am, which was ranked 13th last year.

“Right now, market expansion is still occurring in the right places,” says Thocher. “The turmoil in the capital markets in the early part of the year did slow things down a bit but where there’s a need, we’re seeing capital flowing and the sector growing with the changing consumer behaviors.”

Looking ahead, Thocher expects cold chain warehousing providers to continue finding new ways to deliver healthy, safe food to the populations as efficiently as possible.

“Temperature-controlled storage and logistics providers continue to adapt to the needs of their customers,” Thocher says.

More Undersupply Ahead?

CBRE is bullish on the outlook for warehousing as a whole over the coming year. Despite record construction completions, continued demand from large occupiers will ensure availability remains tight, which puts the vacancy rate in the 3.3% to 3.6% range by the end for 2023.

“Economic uncertainty and difficulties in securing construction financing will cause a sharp drop in construction starts,” CBRE adds, “leading to an even greater undersupply of space in late 2024.”

Source: Logistics Management

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