Storage Gets Smarter—But Is It Getting Riskier?

The warehousing and storage industry plays a vital role in the supply chain, but financial pressures—including rising costs, automation investments, and shifting demand—are creating new challenges for lenders and risk professionals, writes Vertical IQ’s Amy Short in her latest RMA Journal article. Here’s what you need to know: 

Economic Uncertainty Strains Storage Providers 

While warehousing is generally resilient, demand fluctuates with economic conditions. When customers cut back on production or inventory, warehouse operators may struggle with excess capacity and declining revenue. This can impact debt serviceability and liquidity, especially for firms with high fixed costs. 

Automation Transforms Costs and Competition 

Many warehouses are investing in automation to offset labor shortages and improve efficiency. Technologies like autonomous mobile robots and automated forklifts help reduce costs over time but require significant upfront capital. For lenders, the key question is how these investments are being financed—through cash reserves, equipment loans, or outside investors—and whether firms have a clear ROI strategy. 

Inventory Shifts Reduce Third-Party Demand 

Some companies are reducing their reliance on third-party storage by optimizing inventory management, using cross-docking to eliminate storage needs, or shipping directly from manufacturers to customers. This shift could reduce demand for warehousing, increasing competition and putting downward pressure on pricing and profit.  

Safety, Regulations, and Liability Add Risk 

Warehouse operators must comply with strict safety and security regulations, particularly in refrigerated and hazardous materials storage. Liability for damaged or lost goods is another concern, with risks ranging from fire and theft to data breaches for firms handling sensitive documents. Ensuring adequate insurance coverage is a critical part of credit risk assessment. 

Key Questions for Lenders 

• Does the company rely on owner-occupied commercial real estate financing? 

• Is it expanding, and how is it funding growth? 

• How diversified is its customer base? 

• Does it have stable, long-term contracts or fluctuating demand? 

Risk professionals must carefully evaluate the financial stability of warehousing firms. As the industry evolves, automation, competition, and cost pressures will shape its future—and influence lending decisions in the process.