CBRE Group says there will be a rise in the demand for warehouse space due to changes to business supply chains as the nation's economy restarts.
For example, companies may well have to create more domestic supply chains in this new environment. An additional 400 to 500 million square feet of warehouse space is needed for a 5% uptick in business inventories, according to CBRE research.
"Markets with convenient access to seaports may offer very limited space options," according to the firm.
As people continue to follow social distancing guidelines even after city and state economies reopen, there's expected to be extra warehouse demands due to the rise in e-commerce use, according to the firm.
"Established e-commerce hubs at major transportation centers should see strong fundamentals as many occupiers recalibrate their supply chains and build automation and efficiencies into their distribution networks," CBRE said.
The firm noted that super-regional distribution markets like Chicago and the Dallas-Fort Worth metropolitan area seem to be in a particularly good position due to their central locations. In those markets, there are warehouse projects under construction that can provide space for expanded supply chains for e-commerce and increased inventories, the firm said.
The pandemic has also highlighted the "fragility" of just-in-time production networks. CBRE says those networks historically involve "very intricate global supply chains in which goods often go back and forth across international borders many times using many different transportation modes."
"These JIT systems are now susceptible to closed manufacturing facilities, ports and borders due to the COVID-19 crisis," CBRE concluded.
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Ryan Tarinelli
Ryan Tarinelli is a reporter at the New York Law Journal. He is based at the New York State Capitol in Albany, New York. He can be reached through email at [email protected]. Follow him on Twitter: @ryantarinelli.
