**

https://www.scmr.com/article/supply_chain_restructuring_could_lead_to_increased_ind
ustrial_real_estate_d
Supply chain restructuring could lead to increased industrial real estate demand, says
CBRE
The CBRE report, entitled “Distribution Hubs Will Benefit from Increased Business
Inventories & Supply Chain Restructuring,” said there could be a need for an additional
400 million-to-500 million square feet of industrial real estate space. That tally,
according to CBRE Research, would be the rough equivalent of a 5% increase in
business inventories.

By Jeff Berman, Group News Editor · May 27, 2020

A new report recently released by Los Angeles-based industrial real estate firm CBRE
said that the need for supply chain restructuring, due to a what it called a response to
the COVID-19 pandemic, could lead to new practices which could drive further demand
for industrial United States-based industrial distribution space.
The CBRE report, entitled “Distribution Hubs Will Benefit from Increased Business
Inventories & Supply Chain Restructuring,” said there could be a need for an additional
400 million-to-500 million square feet of industrial real estate space. That tally,
according to CBRE Research, would be the rough equivalent of a 5% increase in
business inventories.
“As the U.S. economy restarts, adjustments to business supply chains will increase the
demand for warehouse space,” the report stated. “The downward trend in inventory-to-
sales ratios since the early 1990s could reverse as manufacturers, wholesalers and
retailers store materials and products closer to manufacturing centers and consumers.”
What’s more, the firm added that increasing e-commerce usage is expected to lead to
additional demand for warehousing, as consumers continue to practice social
distancing, at a time when states and cities are taking steps to re-open their economies.
And it added that established e-commerce hubs at major transportation centers are
expected to see strong fundamentals, with occupiers taking steps to recalibrate supply
chains and also build automation and efficiencies into their respective distribution
networks.  This is also being driven by supply chain disruption, in the form on
transportation restrictions related to COVID-19, that have resulted in closed ports and
borders due to shelter-in-place and congestion as things open back up, according to
Matt Walaszek, CBRE Associate Director of Industrial Research. 
The firm said that these steps include things like shippers upping inventories in order to
be closer to both consumer and manufacturing locations that, it said, will spur industrial
product demand.
Other possible options, it noted, include increasing near-shoring or re-shoring
production, with an eye on building up a stronger domestic supply chain. This would
benefit inland hubs—in locales like Inland Empire, Atlanta, PA I-78/81 Corridor, FL I-4
Corridor, Memphis, Greenville, and Central Valley, CA— more so than U.S.-based
seaports, which CBRE said would be “targets” but are currently hindered by tight
inventories.
CBRE’s Walaszek said that the idea of businesses upping inventory levels to be closer
to consumers and manufacturing locations is something that is currently being
considered as a viable strategy going forward.
“It’s not something that would show up in the data yet, but companies will be making
decisions regarding their inventory levels which will impact the demand for industrial
space over the medium-to-long term,” he said.
As for the possibility of how likely, or realistic, it is for business to increase their re-
shoring or near-shoring production to develop a stronger domestic supply chain,
Walaszek said that it is by no means an easy or fleeting decision.
“Rising labor costs in China and ongoing trade conflicts have prompted many global
manufacturers to diversify supply chains throughout Asia in a multi-country strategy,” he
said. “As a result of the COVID-19 pandemic, global occupiers with an over-
dependence in one country or region may reassess their sourcing and manufacturing
strategies. For some, this translates into diversifying their sourcing and manufacturing
within each region (e.g. an Americas manufacturing hub). Notwithstanding, a
widespread exodus of manufacturing capacity from China is unlikely given the
sophistication of the industry, the maturity of the supply chain and China’s massive
domestic consumption market. There is no doubt that the number of small
manufacturers in the Americas will grow significantly, however, the volume produced
from China and broader Asia will likely remain dominant.”
**
https://www.scmr.com/article/prologis_research_highlights_sustainable_growth_pattern
_for_logistics_real
Sustainable growth pattern for logistics real estate remains intact, notes Prologis
Research recently issued in a report by San Francisco-based real estate investment
trust company Prologis pointed to stable market conditions for the industrial real estate
market, in the third quarter.

By Jeff Berman, Group News Editor · October 29, 2019

Research recently issued in a report by San Francisco-based real estate investment
trust company Prologis pointed to stable market conditions for the industrial real estate
market, in the third quarter.
The report, entitled, “Logistics Activity Trending Toward Sustainable Growth”,
highlighted key findings from the Prologis IBI, which is a quarterly survey of customer
sentiment. The IBI pointed to what Prologis called an environment of normalization
away from the unsustainably high levels of activity recorded in 2018” (and came in at 60
for the third quarter; a reading of 50 or higher indicates growth is occurring) with:
-operating conditions remaining healthy, with market vacancy near 4.5%;
-net absorption of 225 million square feet (MSF) and 240 MSF of completions in 2019,
with market vacancy near the current historic low of 4.5%; and
-around half for U.S. development activity begun over the last four quarters was
concentrated in six low-barrier markets, which further reduces supply risk, coupled with
supply rising in smaller multi-market distribution hubs
At a time when logistics activity is normalizing, Prologis pointed to underlying demand
drivers, with macroeconomic conditions are generally downshifting, as leading
economic conditions show a continuation of steady growth, in the form of a 50-year low
for unemployment and still-high consumer confidence, which has gone through a
“controlled descent” in recent months, while consumption still is in a position of strength
as an economic growth driver and a structural driver of logistics demand. 
In an interview, Melinda McLaughlin, Prologis vice president of research, said that the
IBI’s results represent a continuation of the 2019 theme of things continuing to return to
normal and sustainable healthy growth levels.
“The IBI reading of 60 represents healthy and sustainable growth, and we contrast that
with 2018, as it was kind of an outlier year for logistics real estate,” she said. “This is
because of things like the tariff impact, which led to a frenzied amount of activity in
logistics warehouses that just wouldn’t be sustainable for the long term. We saw the IBI
peak at 70 in late 2018 and then come back down to the more sustainable level of 60
throughout this year. It has really hovered around that level, suggesting continued
growth but more in line with the planned progression of the businesses expanding,
rather than somebody trying to respond to a kind of new and unplanned situation.”
While the IBI is slightly down, McLaughlin reiterated that the current level reflects strong
and healthy growth, in terms of the flow of goods through logistics facilities, which
Prologis pairs up with the utilization rate.
This pairing, she explained, shows a very similar pattern, which ties back to the
qualitative feedback Prologis has received from its customers. 
“Utlilization likewise peaked in late 2018,” she said. “If you are rushing to try to take in
imports ahead of any kind of tariff imposition, you are going to stuff your warehouses as
full as they can go. We saw utilization rise to about 87%, which, again, is unsustainably
high. But, if you think about the flow of goods into your facility, you need space for
people, forklifts, and other machinery and need space to flow. In 2019, it has come back
down, and we have seen that rate hover between 85% and 86%, which is a very healthy
level. If we start to see it descend, that would suggest that there is some shadow space
out there, so customers may have more space than they need, but it is not what we
have seen at all this year. It seems like things are on very healthy growth patterns and
very sustainable and in line with the 2%-to-3% GDP growth economists forecast for this
year.”
When asked why about half of U.S. development activity begun over the last four
quarters was concentrated in six lower-barrier markets-Dallas, Houston, Chicago,
Atlanta, Pennsylvania, and the Inland Empire (East), she attributed it to two factors.
One is that vacancy rates in most markets have fallen to all-time lows, even in some
smaller markets that might have had a historically relatively-high vacancy rate.
“[In] Los Angeles, where it is very difficult to build and there is a lot of demand,
vacancies there have stabilized around 1%,” said McLaughlin. “And then there is a
market like Columbus, with a little more land and easier to build, may have historically
been in the upper single digits. We see vacancy rates today, for a number of metro
areas that are sub 5%. When you have healthy market conditions, it obviously spurs
rental growth and that is attractive to development. There is pure development
economics happening in these smaller markets, and there is demand there. In order to
have a vacancy rate that falls to that level, you have to have some demand growth.”
What’s more, McLaughlin added Prologis sees a lot of capital flow into the logistics real
estate sector hoping to be put to work, leading to an aspect of with the search for yield
and opportunity, not everybody can only play in top markets, and are looking for
opportunities among a broader group of markets, which disperses a little bit of the
supply risk.
**
https://www.scmr.com/article/prologis_research_highlights_sustainable_growth_pattern
_for_logistics_
Prologis research highlights sustainable growth pattern for logistics real estate
Prologis pointed to stable market conditions for the industrial real estate market, in the
third quarter.
By Jeff Berman, Group News Editor · October 28, 2019
Research recently issued in a report by San Francisco-based real estate investment
trust company Prologis pointed to stable market conditions for the industrial real estate
market, in the third quarter.
The report, entitled, “Logistics Activity Trending Toward Sustainable Growth",
highlighted key findings from the Prologis IBI, which is a quarterly survey of customer
sentiment. The IBI pointed to what Prologis called an environment of normalization
away from the unsustainably high levels of activity recorded in 2018” (and came in at 60
for the third quarter; a reading of 50 or higher indicates growth is occurring) with:

 operating conditions remaining healthy, with market vacancy near 4.5%;

 net absorption of 225 million square feet (MSF) and 240 MSF of completions in
2019, with market vacancy near the current historic low of 4.5%;
 around half for U.S. development activity begun over the last four quarters was
concentrated in six low-barrier markets, which further reduces supply risk, coupled
with supply rising in smaller multi-market distribution hubs

At a time when logistics activity is normalizing, Prologis pointed to underlying demand

drivers, with macroeconomic conditions are generally downshifting, as leading
economic conditions show a continuation of steady growth, in the form of a 50-year low
for unemployment and still-high consumer confidence, which has gone through a
“controlled descent” in recent months, while consumption still is in a position of strength
as an economic growth driver and a structural driver of logistics demand.   
In an interview, Melinda McLaughlin, Prologis vice president of research, said that the
IBI’s results represent a continuation of the 2019 theme of things continuing to return to
normal and sustainable healthy growth levels.
“The IBI reading of 60 represents healthy and sustainable growth, and we contrast that
with 2018, as it was kind of an outlier year for logistics real estate,” she said. “This is
because of things like the tariff impact, which led to a frenzied amount of activity in
logistics warehouses that just wouldn’t be sustainable for the long term. We saw the IBI
peak at 70 in late 2018 and then come back down to the more sustainable level of 60
throughout this year. It has really hovered around that level, suggesting continued
growth but more in line with the planned progression of the businesses expanding,
rather than somebody trying to respond to a kind of new and unplanned situation.”
While the IBI is slightly down, McLaughlin reiterated that the current level reflects strong
and healthy growth, in terms of the flow of goods through logistics facilities, which
Prologis pairs up with the utilization rate.
This pairing, she explained, shows a very similar pattern, which ties back to the
qualitative feedback Prologis has received from its customers.    
“Utlilization likewise peaked in late 2018,” she said. “If you are rushing to try to take in
imports ahead of any kind of tariff imposition, you are going to stuff your warehouses as
full as they can go. We saw utilization rise to about 87%, which, again, is unsustainably
high. But, if you think about the flow of goods into your facility, you need space for
people, forklifts, and other machinery and need space to flow. In 2019, it has come back
down, and we have seen that rate hover between 85% and 86%, which is a very healthy
level. If we start to see it descend, that would suggest that there is some shadow space
out there, so customers may have more space than they need, but it is not what we
have seen at all this year. It seems like things are on very healthy growth patterns and
very sustainable and in line with the 2%-to-3% GDP growth economists forecast for this
year.”
When asked why about half of U.S. development activity begun over the last four
quarters was concentrated in six lower-barrier markets-Dallas, Houston, Chicago,
Atlanta, Pennsylvania, and the Inland Empire (East), she attributed it to two factors.
One is that vacancy rates in most markets have fallen to all-time lows, even in some
smaller markets that might have had a historically relatively-high vacancy rate.
“[In] Los Angeles, where it is very difficult to build and there is a lot of demand,
vacancies there have stabilized around 1%,” said McLaughlin. “And then there is a
market like Columbus, with a little more land and easier to build, may have historically
been in the upper single digits. We see vacancy rates today, for a number of metro
areas that are sub 5%. When you have healthy market conditions, it obviously spurs
rental growth and that is attractive to development. There is pure development
economics happening in these smaller markets, and there is demand there. In order to
have a vacancy rate that falls to that level, you have to have some demand growth.”
What’s more, McLaughlin added Prologis sees a lot of capital flow into the logistics real
estate sector hoping to be put to work, leading to an aspect of with the search for yield
and opportunity, not everybody can only play in top markets, and are looking for
opportunities among a broader group of markets, which disperses a little bit of the
supply risk.
**
https://www.scmr.com/article/prologis_research_calls_for_a_new_model_for_defining_l
ogistics_real_estate
Prologis research calls for a new model for defining logistics real estate
In its recent research paper, Prologis posits that when the supply chain extends from
the factory to the doorstep, the way we talk about warehouses must change.

By Patrick Burnson, Executive Editor · September 25, 2019

The term “last mile” has become overused and ineffective in describing industrial real
estate, maintains the San Francisco-based consultancy, Prologis.
In its recent research paper, analysts posit that when the supply chain extends from the
factory to the doorstep, the way we talk about warehouses must change.
To that end, real estate leader Prologis has develop d a first-of-its-kind methodology to
redefine industrial properties based on the modern supply chain. It is outlined in great
detail in its paper, “Supply Chain: A New Model For Defining Logistics Real Estate.”
Considering a building’s location versus its functionality, Prologis has determined that
only 10% of the current logistics real estate market can be categorized as “last touch.”
In comparison, 45% of the buildings available today are multi-market; these are newer
facilities located at key transportation hubs at the periphery of major urban areas.
Prologis’ analysis centered around questions of delivery times, income/consumption,
and building design features.
In an interview with Melinda McLaughlin, Prologis’ vice president of research, we
learned more about the framework she developed, and how it corresponds to supply
chains, and what’s next for the sector.
“We developed a data-driven methodology to more accurately describe logistics real
estate properties according to their position along today’s evolving supply chain,” she
says.
According to McLaughlin, researchers focused on three factors: the time it takes for
goods to travel between a facility and its end destination; where goods are consumed;
and the operational efficiency of each segment of the supply chain.
“We then mapped this against the characteristics of buildings to illustrate the trade-offs
companies must consider in weighing location and functionality,” she adds. “In the near
term, we hope that this lexicon can elevate our understanding of our industry.”