Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
Investors have shelved billions of dollars in construction projects since the Covid-19 pandemic and recession began in February, but the logistics sector has largely bucked that trend as companies continue to push a surge in new warehouse creation to handle booming e-commerce demand, according to a pair of studies released this week.
Counting all types of construction nationwide, builders doubled the value of projects they launched between the depths of the 2009 recession and the pre-Covid market peak in 2019, topping out last year at $853 billion worth of single family and multifamily housing, commercial projects, institutional building, manufacturing plants, public works, and electric power/utility sites.
The coronavirus stopped that trend abruptly, however, pushing the overall construction market into a steep decline that is forecast to tumble 14% in 2020 to $738 billion, according to “Dodge Construction Outlook 2021: Moving Forward on the Road to Recovery,” an economic report produced by New Jersey-based Dodge Data & Analytics, a market forecasting firm in the commercial construction sector.
But one exception stands out amid that sea of red ink, as warehouse starts are still expected to grow in 2020. Dodge defines warehouses as part of the larger “commercial” construction segment—alongside stores, offices, hotels, and parking garages—which is expected to fall 23% to $107 billion in 2020 before rebounding in 2021 with a 5% rise to $113 billion.
Likewise, a second report also found signs of a nascent economic recovery in logistics despite significant negative impacts on the retail and hospitality industries, which are particularly reliant on consumer spending and mobility, according to the latest “Global Real Estate Perspective” report from real restate firm Jones Lang LaSalle IP Inc. (JLL).
More specifically, warehouse growth is seeing spikes in certain specialty areas, such as an increase in last-mile logistics facilities as online retail grows, the conversion of retail facilities into logistics facilities in dense urban areas, and demand for cold-storage in the food & beverage and life sciences sectors. “Demand for logistics space has bounced back sharply, hitting record or near-record levels in several major global markets during the quarter. E-commerce companies have been particularly active, supported by increased consumer demand for online shopping,” the JLL report said.
Despite that optimism, the 2021 economic rebound could be delayed until later in the year if certain variables don’t line up, the Dodge report said. “Prospects for recovery in 2021 will be limited until a vaccine has been approved and has been widely adopted, a process that is expected to begin by mid-2021. The uncertainty surrounding further federal stimulus and growing budget gaps at state and local levels, however, cloud the outlook,” said report author Richard Branch, Dodge’s chief economist.
U.S. economy awaits second round of stimulus funds
Another wild card in the recovery will be federal stimulus funding, which made a significant impact on the economy beginning in March, when Congress passed the $1.7 trillion CARES Act—an acronym for Coronavirus Aid, Relief, and Economic Security—including the Paycheck Protection Program (PPP) and other loans and grants. That effect was temporary, however, as the fiscal boost provided by the CARES Act began to fade after income support programs within the act expired in July and the PPP ended in August, Dodge said.
The prospects for quick passage of a second large stimulus package now seem dim, based on November 4 election results that have split federal government control between a Democratic Biden Administration and House of Representatives and a Republican Senate. “Without the help provided by CARES funding, the economy is unlikely to regain significant forward traction until a vaccine has been approved and widely adopted across the United States,” the Dodge report found.
In the longer term, the researchers expect an additional $1.5 trillion of stimulus to be approved in the first quarter of 2021, helping the economy return to stronger growth in the second quarter of 2021. Yet even when that recovery occurs, the impact of the pandemic could have long-lasting implications for the retail industry, changing many of the supply chain patterns that have stood for decades, thanks to the closing of thousands of retail stores that failed to survive the recession.
“While brick and mortar is unlikely to disappear entirely, online shopping became a much more ingrained part of consumer purchasing behavior due to stay-at-home orders,” the Dodge report said. "A massive number of consumers clearly turned to online shopping to deal with the restrictions of Covid-19 in the second quarter. If this sea change in consumer behavior becomes a permanent phenomenon, the long-lasting effects of Covid-19 could mean further deterioration in retail construction starts in coming years.”
Despite the impact of those trends on retail stores, the accompanying rise in e-commerce has been good news for the warehouse construction needed to provide fulfillment for all those online orders.
Beginning at a low point of just 49 million square feet in 2010, warehouse starts increased by double-digit rates for seven consecutive years, resulting in an “amazing” 508% increase that brought starts up to 297 million square feet in 2017, the firm said. After a flat period in 2018, the hot curve resumed with 354 million square feet in 2019, and is forecast to resume that growth in 2021 with post-Covid projects led by a growing number of million-square-foot mega-warehouses built by amazon.com.
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.