larger vessels and sent on the next leg of
their journey. There is an existing shortage
of truck drivers in many areas of the country, and this shortage is expected to grow in
coming years.” With the Panama Canal
expansion wrapping up next year and
improved infrastructure at many East Coast
and Gulf Coast ports, Garner says he anticipates companies will increase the amount
of goods imported via ports, nearer the
product’s ultimate destination, thus increasing demand for warehouse space in those
markets while reducing the amount of time
product spends on the road.
Kim says that e-commerce is likely to con-
tinue as the catalyst for the changing indus-
trial sector. “Major retailers are considering
reducing the size of stores, choosing instead
to offer showrooms with limited merchan-
dise while keeping inventory in warehouses.
As e-commerce continues to be the market
driver and online orders grow at an acceler-
ated pace, trucks need to maneuver in and
out of warehouses quickly in order to make
deliveries on time. New Jersey’s warehouses
offer more land than urban areas to accom-
modate better truck maneuverability and
trailer/container storage. Location near the
ports is also of even more importance, saving
time for the transport.”
Of course, industrial real estate has
evolved with the ever-changing demand of
the supply chain. Mullen says, “Wall Street
has its eye on how companies leverage their
supply chain, and therefore how compa-
nies leverage industrial real estate—and
most companies nowadays have at least
thought about transforming their supply
chain to keep up.”
According to Garner, companies, partic-
ularly importers, are focused not only on
increasing supply-chain efficiency, but also
supply-chain diversification. “West Coast
labor disruptions and shifting populations
have influenced importers to take a hard
look at their supply chains. This has led
many companies to import products via
multiple markets, often through ports and
airports that are situated closer to the prod-
uct’s final destination. The efficiency of
transporting goods via intermodal contain-
ers—and the resulting increase in goods
flowing through the supply chain—has
caused tenant demand for additional
trailer parking, truck-queuing lanes, higher
clear heights and bigger buildings, as well
as the emergence of inland ports and inter-
modal centers.”
Ward says his firm is starting to see the
rise of inland-ports cities such as Chicago,
Memphis and Kansas City becoming
larger distribution centers receiving goods
by rail from the ports. “This is a result of
rail being more economical to ship the
goods. We see material handling innova-
tions within the buildings improving.
Robotics and more-sophisticated con-
veyor systems are changing the way we
handle goods.”
Mele says a significant change has been
the industrial sector’s arrival as a preferred
asset class. “Institutional investors, foreign
and domestic, have identified industrial as
a project type of choice. It is not an over-
statement to say that developers are cur-
rently enjoying the most exciting period of
growth and innovation ever experienced
in industrial real estate.”
Mullen says that while industrial use has
come a long way, it is still behind compared
to the other tenants of a company’s supply
chain: inventory decisions, process, auto-
mation and communication with consum-
ers that all move at the speed of light.
“Industrial space could be argued as the
most important part of the supply chain—
home base. We have to apply the same
thinking in our industry and innovate.”
According to Hess, with the emphasis on
logistics, small-user buildings, light manu-
facturing, incubators, and service-center
buildings are not getting developed at the
same pace as larger warehouse distribution
and logistics centers. “As the population
grows but the supply stays the same, this
imbalance could potentially create a favor-
able dynamic for those investing in smaller-
tenant industrial.”
Land is another ever-present concern.
Ward says, “We think the greatest chal-
lenge to the industrial real estate sector is
the availability of land to build these
larger buildings. Large logistics buildings
are getting pushed farther away from the
population centers in search of lower
land prices.”
He adds that rising occupancy costs are
creating other challenges for the industrial-
development sector. “Higher cost of land
coupled with municipal building codes are
driving up the cost to build buildings
today.” However, since users are keenly
aware of their occupancy costs as a percent-
age of revenue, they are using their facili-
ties more wisely and efficiently, says Ward.
The rising cost of labor and a highly
competitive marketplace are two chal-
lenges Lebovitz believes will have a long-
term impact on the industry. “Employee
turnover is also a huge concern. You can
have the best industrial building in the
most strategic location, but if you don’t
have a consistent and reliable staff in
place, you can run into serious problems.”
With the growth of logistics, Lebovitz
says he anticipates many firms will become
much more cost-conscious and will con-
tinue to invest heavily in technology that
will help drive costs and inefficiencies out
of the supply chain. “Technology, along
with a sustainable labor force, will allow
many companies to cope with the ‘peaks
and valleys’ (busy and slow periods) that
are inherent within the industrial sector.”
Kim adds, “Redevelopment is an oppor-
tunity, but the process needs to be sped up
with fewer obstacles. There’s also a trans-
portation budget crisis, and bridges and
roads are in desperate need of repair.” ◆
Reprint orders: www.almreprints.com
There is an
existing
shortage of
truck drivers
in many
areas of the
country, and
this shortage is expected to
grow in coming years.”
JEREMY GARNER
Trammell Crow Co., Central US
Developers
are working
with state
and local
economies to
ensure that
infrastructure
improvements, especially
transportation are being
addressed, since locating
near ports and rail lines
has become more essential
than ever.”
NICK KIM
Transwestern
