It’s not every day that a high-level executive joins the on-demand warehousing world after a 20-year stint with an online dating service. It’s also not every day that his new company counts The Salvation Army as its largest source of warehouse supply. But Grant Langston checks both boxes.
Langston, 54, joined Los Angeles-based Warehouse Exchange as CEO in late January after stepping down Jan. 1 as CEO of eHarmony, an online dating pioneer that was acquired in October 2018 by German media firm ProSiebensat.1 Media. Langston, who was eHarmony’s third employee, planned to take a year off between jobs. However, he had a meeting with Warehouse Exchange’s co-founders Jonathan Rosenthal, who is CEO of incubator Saybrook Management, and Dan Pimentel, who also serves as Warehouse Exchange’s CFO. One hour turned into three hours, and Langston was soon back at work.
What piqued Langston’s interest was the “tremendous overlap” in the management skills required to run an online dating service and an on-demand warehousing company. Both are marketplaces that match supply and demand, and both involve significant relationship-building, he said in an interview with FreightWaves.
What’s more, eHarmony is known for its exhaustive vetting process; members are required to complete an exhaustive questionnaire before a computer matches them with suitable partners. The learnings helped sharpen Langston’s decision-making skills as his firm worked toward refining the segment that few warehousing firms currently play in, he said.
Founded in 2017 and self-branded as the Airbnb of warehouse leasing, Warehouse Exchange operates as an IT platform and owns no physical assets. It focuses on matching small companies with very short-term leases for relatively tiny amounts of space. Small businesses account for about two-thirds of its tenant base, while the remaining one-third are what Langston calls “corporate entities” seeking some degree of flexibility for their capacity needs.
Warehouse Exchange’s typical lease duration is 10 months. The average leasing space is 2,500 square feet. About 80% of tenants “overstay” their leases because they get comfortable with the arrangement, Langston said. These tenants are willing to pay a premium for the space both because they absolutely need it and because they don’t have to commit to long-term leases, according to Langston.
Meanwhile, a warehouse operator could make a good buck by dividing, say, 40,000 square feet by multiple tenants, Langston said. Warehouse Exchange collects a 5% commission from each side of the deal, Langston said. Demand for its services, especially heading into the peak season and with the COVID-19 pandemic still raging nationwide, has been “on fire,” he said.
In mid-June, the company said that it had 22,000 companies search for space on its site over the past 18 months.
Warehouse Exchange’s unconventional model requires that it look beyond traditional warehousing sources such as contract logistics firms, Langston said. Traditional warehouse operators aren’t interested in the short durations or the miniscule space requirements. In addition, operators make most of their money not from the space but from the services they provide inside it. Warehouse Exchange’s tenants generally do the work themselves and just want the unadorned space in which to do it, Langston said. “There is no tenant improvement language” in its leases, he added.
The Salvation Army, which controls large amounts of unused bare space inside collection and purchase centers, is the company’s largest multi-state provider, Langston said. Warehouse Exchange declined to provide specifics on the relationship other than to say it expects the charitable organization to be a “significant contributor” to its warehouse space over the next couple of years.
The company has recently signed an agreement with the state of Utah to embed its services on its website. It has also been talking with parking deck operators about leasing space for last-mile deliveries after the pandemic has reduced commuting and other activities that require the need for vehicle parking.
The toughest nut to crack will be third-party warehouse operators, Langston said. However, the slew of small-company bankruptcies since the pandemic hit has “scared a lot” of the traditional operators that counted on those tenants for cash flow, he said. They may look to the Warehouse Exchange model as a “security blanket” to shield them against the risks of future lost business.
In the foreseeable future, it may be common for warehouse 3PLs to effectively cordon off 40,000 square feet of warehouse space for the on-demand need that is in Warehouse Exchange’s wheelhouse, Langston said.