SAN BERNARDINO, Calif., Aug 2 (Reuters) – America’s largest warehouse market is crowded as major US retailers warn of a slowdown in sales of clothing, electronics, furniture and other goods that filled distribution centers east of Los Angeles.
Goods continue to come in from across the Pacific, and things are even worse for one of the busiest warehouse complexes in the US.
Experts warned that the U.S. supply chain would suffer a “whip effect” if companies panicked to order goods to fill shelves and faced a drop in demand while supplies were still flowing in from Asia.
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In the largest warehouse and distribution market in the United States, stretching east from Los Angeles to the area known as the “Inland Empire”, this moment seems to have come.
“We feel the sting of the whip,” said Alan Amling, a supply chain professor at the University of Tennessee.
The sprawl of Inland Empire warehouses, centered on Riverside and San Bernardino counties, has grown rapidly in recent years to cope with rising demand and goods imported from Asia.
This booming area, visible from space, is the anchor of an industrial corridor covering 1.6 billion square feet of warehouse space that stretches from the busiest US seaport in Los Angeles to the borders of Arizona and Nevada. This large storage space is nearly 44 times the size of New York’s Central Park and 160 times the size of Tesla Inc. (TsLA.O) New Gigafactory in Texas.
But cuts in consumer spending now threaten to flood warehouses here and across the country with more goods than they can handle, exacerbating the supply chain problems that fueled inflation. Retailers left with junk merchandise are faced with a choice: pay more money to store them or cut profits by selling them at a discount.
Warehouse vacancy in the Inland Empire is among the lowest in the country, at a record 0.6% compared to the national average of 3.1%, according to real estate firm Cushman & Wakefield.