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 U.S. industrial property category has left the economic downturn in the rearview mirror.
Industrial property markets remained tight during the first quarter, as growing demand for big box distribution
centers to fulfill e-commerce orders significantly outstripped the new supply of space which, despite a pickup, remains
at historic lows, according to recent reports by CB Richard Ellis (CBRE) and Jones Lang LaSalle (JLL), two of the country's
leading real estate services firms.
Demand in the industrial market shrugged off bad first-quarter weather and a softening of U.S. export demand and appears
poised to party like it's 2006-07, before the financial crisis and subsequent recession sent rents plummeting and brought
construction to a standstill. JLL said that about 185 million square feet could be absorbed on a net basis in 2014, meaning
there will be far more industrial space occupied than vacated. CBRE forecasts net absorption to reach 164 million square feet
for the year. Arthur F Jones, senior managing economist at Los Angeles-based CBRE, said in an email that the firm expects a
"relative[ly] stable year" for industrial demand.
The mismatch of supply and demand continued in the first quarter and is expected to persist through the year, making space
dearer to come by, according to both firms. The U.S. "industrial availability rate" declined in the first quarter to 11.1 percent,
the 14th consecutive quarterly decline, according to CBRE data. The rate peaked during the recession at 14.5 percent, CBRE said.
JLL forecasts 145 million square feet of new construction to be underway by year's end, said Craig Meyer, president of the
Chicago-based firm's industrial brokerage arm. Meyer said that the number, which is a conservative estimate, is still at historic
lows when measured against the size of the U.S. industrial supply base.
New construction in the first quarter totaled 24.7 million square feet, according to CBRE data. Although that represented the
second-highest quarterly total since the recession ended, it is still only half of the normal quarterly construction activity that
existed prior to the recession.
The muted construction growth is a vestige of the Great Recession when builders and developers went into hibernation, Meyer
said. "For a three- to four-year period, we turned the spigot off. We didn't build a thing," he said. From 2010 to 2012, the
number of completed projects hit a 60-year low, according to CBRE.
According to the CBRE report, five markets—Columbus, Ohio; California's Inland Empire east of Los Angeles; Phoenix; Houston;
and Dallas/Fort Worth—accounted for 55 percent of the first-quarter 2014 construction activity. Four of those markets are in the
Sun Belt, Southwest, and West Coast, markets that were mostly spared winter's fury and where construction could continue.
Columbus, located at or near the heart of the nation's transport network, is fertile territory for big-box facilities catering
to the nation's seemingly insatiable demand for e-commerce. Not surprisingly, most of the construction demand is in the 350,000-
to 500,000-square-foot and higher range, where e-commerce fulfillment tends to live.
The results of the supply-demand imbalance are shrinking vacancy rates and higher rents. The vacancy rate for big-box
e-commerce sites, traditional warehousing and distribution centers, and manufacturing plants is expected to drop to 7.5
percent by mid-year, according to Meyer. That would be a new low for the current cycle, which began in early 2008. If current
trends continue, vacancy rates could fall to 7 percent or lower by year's end, he said.
In the red-hot Dallas/Fort Worth market, vacancy rates are approaching 5 percent, Meyer said. CBRE noted that Atlanta, which
has lagged the national market in recent years, is gaining momentum thanks to increasing trade and inventory flows due to its
close proximity to the fast-growing Port of Savannah. Atlanta led the nation with 5.6 million square feet of net absorption in
the quarter, doubling its totals for a year ago and putting it on par with 2007 levels, the firm said.
According to JLL data, rents are rising in 48 of the 50 industrial markets it canvasses. Rents in many markets are within 5
percent or less of their peak levels, and rents in some markets have already surpassed earlier peaks, JLL said. Meyer said rents
in 2014 will increase, on average, by 3 to 3.5 percent over 2013 levels.
CBRE said rents will continue to strengthen as long as new construction remains relatively subpar. Only when developers start
taking on "speculative" projects, where facilities are constructed and a tenant or tenants are then found, will the amount of new
supply cause rent growth to level off, CBRE said. That scenario isn't expected to occur until the end of 2016, it said.
At this point, about half of all new construction is "spec," Meyer said. The other half is known as "build-to-suit," where a
tenant commits to a site and the facility is custom-designed for its needs. Historically, spec development has accounted for about
80 percent of new activity, Meyer 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 U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
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.