Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
The ailing U.S. industrial property market showed a pulse in the second quarter for the first time in two years. However, the patient is far from healthy.
That's the takeaway from a report issued Tuesday by real estate and industrial services giant Jones Lang LaSalle (JLL). According to a JLL survey of 38 markets, the average industrial vacancy rate declined to 10.4 percent in the second quarter from 10.6 percent in the first quarter, the first sequential decline in vacancy rates since the financial crisis exploded in September 2008.
JLL's second-quarter North America Industrial Outlook showed that average "net absorption"—the amount of space being leased relative to the space being returned to the market—stood at 11.1 million square feet in the quarter. However, the net absorption figure through the first half of 2010 remains at a minus 7.4 million square feet, meaning leasing activity, while improving, is still not keeping up with the amount of space being vacated, according to the JLL survey.
Markets like New Jersey and California's Inland Empire, where prices have plummeted since the recession began, showed positive net absorption year to date, the survey found. In addition, the Dallas market has reported positive leasing activity, the report said.
Craig Meyer, managing director and head of JLL's logistics and industrial services group, said the category remains vulnerable to any downshifts in the economy. "While we can report some overall positive news for the sector, we are still very much at the mercy of this precarious economy," he said in a statement. "Declining consumer confidence, the fading impact of the federal stimulus support, and worldwide economic volatility are forcing many industrial landlords, tenants, and investors to look back over their shoulders in fear of a double-dip recession."
The nation's industrial markets are not moving in lockstep. For example, it has grown increasingly difficult to locate 350,000-square-foot properties in markets like Indianapolis and the Inland Empire. By contrast, there is an abundance of 100,000- to 200,000-square-foot facilities virtually throughout the country, the report said.
The report showed that two-thirds of the markets tracked by JLL experienced positive net absorption in the quarter, while 20 percent showed declining absorption. Major industrial markets like Chicago and Los Angeles account for a combined 8.3 million square feet of negative net absorption so far this year, the report said. However, both markets are showing recent signs of stabilizing, with submarkets around their ports and airports benefiting from recent growth in container traffic and aircargo tonnage, according to the report.
Meyer said developers have deliberately avoided overbuilding during the downturn, with much of the overall weakness attributed instead to a decline in demand. The cautious approach has continued. Only 11.3 million square feet of new construction is in the pipeline, and 83 percent of that is pre-leased, Meyer said. "There is no speculative building going on," he added.
Although the pace of decline in "asking rents" has slowed, Meyer said many developers and lessors are still aggressively packaging their parcels both in terms of price and perks. Renewals account for a large share of current leasing activity, so the trend toward renewing leases at lower rates or with perks included—known in the industry as "blend and extend"—remains popular, Meyer said.
"Competition for tenants is fierce in almost every market, and... concession packages, including periods of free rent and tenant improvement packages, continue to be a critical component when completing deals," Meyer said. "We will continue to see price degradation across many markets" before supply and demand come into alignment and rents begin to climb, he said.
The survey found the lowest industrial rents in Columbus and Memphis, with the highest in San Diego, San Francisco's Bay Area, and South Florida.
Meyer said he would like to see two or three successive quarters of declining vacancy and positive net absorption rates before he feels confident in a sustainable recovery. "I'm expecting about two more years of this," he said, referring to the current volatility and overall softness.
One encouraging note for developers and lessors is that the supply of sublease space has decreased nationwide, a sign that demand is on the rise again. Northern and Southern California have the highest volumes of marketed sublease space, followed by mid-tier markets like Memphis and Nashville, the report said.
In addition, demand for high-end prime logistics space is topping the general market and has given a boost to Midwest markets like Memphis; Columbus, Ohio; central New Jersey; Philadelphia; and Harrisburg, Pa., the report said.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.