Each year, Modern takes look at the Top 20 third-party logistics (3PL) warehouses to see who’s leading the way in regard to total square footage of storage space. This year’s annual ranking again reflects the general state of the economy, with 2011’s strong performance followed by weaker growth in 2012. Read last year’s list.

This year, we have once again called upon Dick Armstrong, chair of Armstrong & Associates, who closely follows the 3PL sector of the warehousing industry, for his insight. Armstrong predicts 3PL warehousing revenues for 2012 and 2013 will grow by about 6% each year. This follows 8.2% growth in 2011.

In terms of overall square footage, some adjustments to reported figures make an apples-to-apples comparison for the entire Top 20 a bit tricky. At 547 million square feet, this year’s Top 20 sum would appear less than 1% larger than last year’s 543 million. However, square footage for the top eight, whose rankings and reporting practices remain unchanged, has grown by 5.8%. Overall, Armstrong called the growth in square footage modest, and said new construction is very limited.

The value-added segment of 3PL warehousing, which represents about 26%, or $35 billion of the $131 billion 3PL market, has been the fastest-growing segment. The predicted total 3PL market value for 2012 is $142 billion, an 8.4% increase. But growth in net revenues for warehousing tends to be about three times the annual growth in gross domestic product (GDP), according to Armstrong. This year, the International Monetary Fund (IMF) predicted 2013 GDP growth of 1.5%, as compared to 1.3% in 2012 and 1.6% in 2011. Armstrong cited these figures as the basis for his predicted 6% growth in net revenues for 3PL warehouses in 2012 and 2013.

“We’re going to see single-digit revenue growth that’s nothing to get excited about,” says Armstrong. “That reflects where we are in the economy. Anything above 6% in 2013 would surprise me, and in the worst possible case it will only grow by 2% or 3%, but we won’t see negative growth.”

The worst possible scenario essentially revolves around the fiscal cliff and the potential for large government spending cuts, says Armstrong. Although the election is behind us, uncertainty still looms.
“This will be a very challenging year, with the possibility of a global recession,” he says. “There’s only so much the United States can do, given what’s happening throughout the world.”