Demand remains red hot for large warehouses near major cities, as e-commerce and last-mile logistics providers seek sites close to their customers in order to provide efficient delivery, an industry report finds.
Online retail giants and their third-party logistics (3PL) partners are driving the trend, which is triggering rising land and development costs in many key markets, according to the "Spring 2019 Global Industrial Market Report" from Avison Young, a Toronto-based commercial real estate services firm.
The facilities in highest demand are customized design-build facilities that are fully automated and reliant on new technologies, as renters seek further supply-chain efficiencies, the firm said. The report echoes a recent finding by commercial real estate giant CBRE Group Inc. that e-commerce and logistics companies are claiming a growing share of U.S. warehouse leases as they search for the optimal sites for locating their DCs.
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"E-commerce logistics, distribution, and warehousing requirements continue to drive the market and are increasing in line with online retail sales," Mark E. Rose, chair and CEO of Avison Young, said in a release. "This strong demand has driven down supply, with developers increasingly becoming more innovative in regard to maximizing value through the repurposing of obsolete assets such as vacant big-box retail stores and aged office buildings, as well as exploring multi-storey facilities in a growing trend that caters to demand for close-in warehousing and distribution."
While the U.S. tends to receive most of the headlines for e-commerce growth, this market sector is heating up across the globe. The report covers 64 industrial markets in seven countries across the globe: Canada, the U.S., Mexico, Poland, Romania, the U.K., and South Korea. For all those markets, the strong demand and tight supply continue to put upward pressure on rental rates, while single-digit vacancy rates stayed low.
In response, investors are building new warehouse properties to meet the demand. The analysis revealed that the development pipeline remains robust, in terms of both product deliveries and new space under construction. Those investors are attracted not only to the newest distribution and warehouse facilities, but also to the opportunity to find additional value in older assets near urban areas, according to Avison Young.
"Investor interest in the industrial sector continues to grow unabated and the forecast for the remainder of 2019 is that industry dynamics will continue to be positive, attracting investors and resulting in low yields and rising asset values," Rose said.
Drilling down to North American regions, the report found that the average U.S. industrial vacancy rate was unchanged at 5 percent compared with one year earlier and the largest U.S. markets remained extremely healthy and landlord-favourable.
According to the report, last-mile logistics are fuelling an increasing number of adaptive reuse projects and the U.S. industrial market continues to record exponential supply growth as it adapts to the modern requirements of occupiers. In land-constrained metros, the redevelopment of obsolete assets like vacant big-box retail stores and aged office buildings is a growing trend that caters to demand for close-in storage, warehousing and distribution.
Likewise, Canada's industrial vacancy rate remains at a historic low, ending first-quarter 2019 at 3 percent—down 70 basis points from the same quarter in 2018. Canadian demand is outpacing new development and will continue to do so, even though almost twice as much space is under construction compared with spring 2018, the report found.
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.