Subleases are surging as companies pare back storage capacity they built up during the pandemic

Warehousing demand is starting to shrink

Retailers and their suppliers have been slashing their inventories. Now they’re turning to cutting back storage space.

A once-booming U.S. warehousing market is coping with signs of contraction as businesses consolidate warehouses and in some cases upgrade existing sites rather than add facilities. The shift comes as retailers have turned the corner on a big drawdown of inventories and are aligning their supply chains for more normal, prepandemic stocking and consumer spending patterns.

Consumer-goods maker Newell Brands, retail-pharmacy chain Rite Aid and sports-apparel retailer Fanatics are among the merchants closing warehouses or upgrading existing facilities rather than opening new sites this year.

Other companies are unloading storage capacity by subleasing space. The amount of U.S. warehouse space listed for sublease reached a record high of more than 156 million square feet in the fourth quarter of 2023, more than three times the amount available in the fourth quarter of 2021, according to real-estate services firm Savills.

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