New demand for industrial real estate is emerging as international trade continues to morph in response to various trends, according to the 2020 CBRE Research Global Trade Report. In addition, the coronavirus pandemic is accelerating many of these trends.
Companies have diversified their supply chains in recent years due to trade and geopolitical tensions, technology advancement and increasing transportation costs. As they go through these changes, consumers are increasingly purchasing goods online, making it even more important for companies to keep greater and diverse inventories closer to their end location. Most recently the pandemic led to inventory control failures and companies are now more concerned with having enough inventory to support more online orders.
All of these factors—which include inventory controls, consumer habits, population growth and transportation strategies—are creating additional industrial real estate opportunities in the Southeast US, Mexico, Mediterranean port markets in Europe, Vietnam and Asia, where increased infrastructure spending and modernization is already taking place, the report said. Trade giants China, the Western US, and northern seaports of Europe will continue to be global leaders.
Even as the free flow of goods has been challenged by countries reshoring manufacturing jobs, global supply chains remain interconnected, which poses a risk as global events, such as the coronavirus pandemic, disrupt the entire chain. The report found that the need to control the costs of goods makes a downturn in global trade unlikely. Rather, improving supply chain resilience, protecting intellectual capital and addressing changing consumer habits will shift the flow of goods globally.
In the US, seaport markets have the lowest industrial vacancy rates—3.9% in the first quarter of 2020, which is 60 basis points lower than the national average. The US' southeast coast is the highest industrial growth market in the country because it has significant logistics capacity, available land for industrial and manufacturing development, lower asking rents, and access to the biggest concentrated population in the U.S.
CBRE also found that e-commerce hubs near large transportation centers will see strong fundamentals long term, and some markets, such as Dallas/Ft. Worth and Chicago, are well-positioned because they are centrally located to handle an influx and outflux of goods and services.
Other markets in the US that are near seaports, such as the Inland Empire, Atlanta, Pennsylvania I-78/I-81 Corridor, Memphis, Florida I-4 Corridor, Greenville, and Central Valley, California may have limited space options in the coming years and will therefore benefit inland hub markets.
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Samantha Stokes
Samantha Stokes, based in New York, is a staff reporter at American Lawyer covering the business of law. You can reach her at [email protected] or on Twitter: @stokessamanthaj.
