A Blog by Jonathan Low


Oct 29, 2017

How Old Mills and Malls Are Coming Back To Life As Ecommerce Warehouses

Real estate - and people - have been 'repurposed,' to the economic advantage of many depressed locales.

But concern about what automation will do is top of mind. JL

Natalie Kitroeff reports in the New York Times:

Warehouses have produced hundreds of thousands of jobs since the recovery began in 2010, adding workers at four times the rate of overall job growth. A significant chunk of that growth has occurred outside large metropolitan areas. “These fulfillment center jobs are not being created in the tech hubs. It’s location, being able to serve customers. It’s the infrastructure available. It’s the work force.” Lingering over is the unnerving question of when, exactly, the robots will ruin the party.
Ellen Gaugler remembers driving her father to the Bethlehem Steel mill, where he spent his working years hauling beams off the assembly line and onto rail cars.
When the Pennsylvania plant shut down about two decades ago, Ms. Gaugler thought it was the last time she or anyone in Bethlehem would come to its gates to find a job that paid a decent wage for a physical day of work.
But she saw an ad in the paper last year for a position at a local warehouse that changed her mind. She’d never heard of Zulily, the online retailer doing the hiring, but she knew the address: It was on the old mill site, steps from where her father worked.
“When I came for the interviews I looked up and said, ‘Oh, my God, I feel like I am at home,’” Ms. Gaugler said. She got the job.
As shopping has shifted from conventional stores to online marketplaces, many retail workers have been left in the cold, but Ms. Gaugler is coming out ahead. Sellers like Zulily, Amazon and Walmart are competing to get goods to the buyer’s doorstep as quickly as possible, giving rise to a constellation of vast warehouses that have fueled a boom for workers without college degrees and breathed new life into pockets of the country that had fallen economically behind.
Warehouses have produced hundreds of thousands of jobs since the recovery began in 2010, adding workers at four times the rate of overall job growth. A significant chunk of that growth has occurred outside large metropolitan areas, in counties that had relatively little of the picking-and-packing work until recently.
“We are at the very beginning of a rather large transformation, and the humble warehouse is the leading edge of this,” said Michael Mandel, chief economic strategist at the Progressive Policy Institute in Washington. “These fulfillment center jobs are not being created in the tech hubs that were growing before. We’ve broadened the winner’s circle.”
Americans have grown more comfortable ordering everything on the internet, including bulky wares like canoes and refrigerators. Warehouses, as a result, have become gargantuan, doubling in size since 2010, according to CBRE, a real estate services firm.
And while robots have started to intervene in the process, it still takes a lot of bodies to move hundreds of thousands of boxes in and out of these buildings every day. Warehouses serving the largest e-commerce sites typically employ upwards of 2,000 people.
The hubs of this network are far-flung. In Bullitt County, Ky., south of Louisville, warehouse employment surged to 6,000 in 2017 from 1,200 in 2010, according to the Labor Department. In Kenosha, Wis., once a manufacturing hub whose auto plants turned out Nash Ramblers and Plymouth Horizons, warehouse jobs grew to 6,200 from 250 in the same period.
Those places have the advantage of being surrounded by highways and rail lines that lead to some of the nation’s largest cities. They also have an abundance of cheap land and labor, two assets that have become increasingly vital to companies selling online.

Bigger Growth in Smaller Counties

The 20 counties with the largest job markets in 2010 have accounted for a quarter of the nation’s net job gain since then. But the warehouse boom is playing out differently. Only 11 percent of the new jobs have gone to these large counties, and the industry is growing rapidly in smaller counties adjacent to population centers and major highways.
Counties where warehouse
jobs have doubled,
or more, since 2010
20 counties
with the largest
labor markets
in blue
Lehigh and
Counties, Pa.
Interstate highways
Kenosha Co., Wis.
Bullitt Co., Ky.
Only two counties in the top
20 labor markets had big
gains in warehouse jobs:
Dallas, Tex. and Fulton, Ga.,
where Atlanta is.
The same calculus has made a warehouse mecca out of the land that houses the carcass of Bethlehem Steel, giving natives like Ms. Gaugler a sense that their hometown may be thriving.
Ms. Gaugler, 54, earns $13.50 an hour putting together shipments at the Zulily warehouse, where employees tend to refer to their end customer as “Mom.” She works 10-hour shifts from Wednesday through Saturday, and puts in for overtime whenever she can.
“I like to get those orders out to Mom,” she said. The work is physically demanding, she said, but it’s straightforward. She gets a list of items to pull from shelves every morning — toys, glassware, baby clothes — and works her way to the bottom as quickly as possible. She’s gotten two raises, of 25 cents each, over the last year.
There are people in town who are nostalgic for the time when the mill filled the sky with black smoke and the furnaces churned all day. Not Ms. Gaugler. “These are secure jobs,” she said. “With the steel, you didn’t know if you would have a job the next day.”
Her father may have had a better deal at the mill — he got 13 weeks of vacation and “didn’t have to worry about bills every so often,” Ms. Gaugler said. But she only has an associate degree, and said this job pays better than most of her alternatives. It also comes with health insurance, paid time off and a 401(k) retirement plan.
Before the warehouses came to the area, it had little to offer in the way of decent-paying, low-skilled work. But Amazon saw something promising in the city’s bones.
It is flanked by Interstate 78, providing a gateway to the nation’s biggest metropolitan area — New York is 80 miles away — and putting seven other states within a day’s drive.
“It’s location, being able to serve customers on the Eastern Seaboard and the Mid-Atlantic,” said Ashley Robinson, an Amazon spokeswoman. “It’s the infrastructure available to move those trucks out of the Lehigh Valley. It’s the work force.”
The company opened two modest facilities outside Allentown, Bethlehem’s neighbor to the west, a place made famous by a Billy Joel song about the death of factory jobs. Other retailers rushed in, drawn partly by incentives, including abatements and credits, allowing companies that developed on the steel mill land to save hundreds of thousands on their tax bills over 10 years.
As a result, the stretch of eastern and central Pennsylvania that includes the Lehigh Valley has grown faster than any other market in the country over the last five years, according to CBRE. While retailers tend to bulk up their facilities with temporary helpers around the holidays — Amazon has announced plans to hire 120,000 seasonal employees by the end of the year — they have also taken on an army of full-time workers. Warehouse employment in a two-county area that includes Bethlehem jumped to 15,200 in 2017, from 5,200 in 2010.
“I don’t know of another place in the world that has gone from a submarket to a global hub in eight years,” said David Egan, the global head of industrial and logistics research at CBRE. “It’s undeniable that it is a key, crucial market for global trade.”
Some of the biggest players in the warehouse game have staked a claim to Lehigh Valley land. Walmart has two huge facilities in Bethlehem. FedEx is building one of its biggest ground locations in the nation in the area, and the United Parcel Service opened a new hub near the New Jersey border last year to handle the torrential volume of traffic coming through eastern Pennsylvania.
The boom in warehouses has created a seemingly endless appetite for stockers, pickers and packers, turning the town into a magnet for people in need of a second chance. Omar Pellot is one of them.
Mr. Pellot left the Bronx, where he was born, because it seemed as if the city had run out of jobs for people with his particular résumé.
He says he started dealing drugs at the age of 8, on the guidance of his father, a “drug dealer turned drug addict.” He was in and out of jail as a teenager and spent a year on Rikers Island as a 17-year-old, he said. After that stint, he had a hard time finding work in New York, so he relocated to Florida and eventually moved to the Lehigh Valley, where, he had heard, the job market was “awesome.”
He got a job at Amazon almost immediately. When the company asked about his background, he said, “I explained it to them — you know, I was young and naïve and stupid.”
In a year as a picker — retrieving items from vast shelving units — Mr. Pellot said he walked about 10 miles on his night shift, and got two raises that pushed his hourly pay to $14.30. He passed a test to become a forklift driver and has his sights set on becoming a supervisor.
Now 38, he spent his childhood “thinking that street life would make me a man,” he said. “But this is what makes me a man, working hard.”
The shifts in warehouses may be long, and the work tedious and exhausting, but they are a better bet for people like Mr. Pellot than anything else in eastern Pennsylvania. The average warehouse worker in the area earns $14.46 an hour, compared with $12.67 for those in retail sales and $10.85 for waiters.
“The conventional wisdom is that retail jobs are better and that losing them is bad for an economy,” said Don Cunningham, president of the Lehigh Valley Economic Development Corporation. “The reality is that fulfillment jobs are paying a higher wage and offering more long-term opportunity.”
Lingering over Bethlehem is the unnerving question of when, exactly, the robots will ruin the party. In a Walmart fulfillment center that takes up as much land as a big-league ballpark, machines have begun to take on some of the tasks involved in getting people their goods within a day of a click.
As boxes careen down a conveyor belt on their way out of the building, tiny devices known as “shoes” follow alongside and jerk forward to push the packages into chutes that funnel them into the truck they are destined for.
Box-shaped machines glide along shelves to snatch crates and deposit them onto a conveyor. There are no accidents on these routes — right before two boxes are about to crash into each other, a combination of sensors and software stops one and lets the other pass.
But for now, humans are still needed, in ever-increasing numbers.
“There’s still a lot of stuff that gets done not necessarily by hand, but aided by the use of labor,” said David Tarnosky, the general manager of the warehouse. Walmart started the year with around 1,100 full-time employees there, and doubled that number by October.
“We won’t stop hiring through peak of this year,” Mr. Tarnosky said. By this time next year, he will have hired hundreds more.


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