Drones Will Never Deliver Your Online Shopping
Anytime soon, that is. Until we’re 3D-printing gadgets in our Star Trek-style living rooms, industrial real estate will remain one of the strongest and most stable asset classes. That’s why we’re holding our 4th annual Industrial Real Estate Summit later this month. Meantime, here’s the latest on how we’re making things, storing them, and getting them from Point A to Point B.
A Good Problem To Have
Solid absorption has led to a flurry of development activity (primarily spec buildings), Newmark Grubb Knight Frank executive managing director Geoff Kasselman (snapped modeling Google Glass, he'll give opening remarks at the event), tells us. The issue: there’s a developing shortage of some construction materials. Industrial’s concrete wall panels are fabricated at precast plants, which require “bed time” reservations like a hotel, and if you called for a reservation today you might not take delivery until October, he says. Starting construction in October means playing Russian roulette with the weather, so you might as well wait until next April. This materials shortage in the construction market can cause a ripple effect, Geoff says, ultimately raising project costs, blowing budgets, and forcing rents to go up.
Manufacturing Local and Nearshoring
There’s been a complete reverberation away from offshoring to smarter, leaner, cheaper local manufacturing (especially in the food industry) or nearshoring, Geoff says. Meaning Mexico (the border above) is on fire. American and international corporations alike are flocking south of the border for their manufacturing and distribution, he tells us, taking advantage of NAFTA opportunities and lower labor costs. And it’s a stable environment with easy access. Most of the products are going to the US where we all can consume them, which means no barges, just lower-cost trucks or trains to reach the consumer. (Added bonus: no sharks.) The real estate down there still offers tenants a 36’ clear “Prologis experience,” he says, but you’re producing higher quality at a lower price point.
Supply Chain of the Future
Omni-channel retailing and same-day delivery dynamics mean radical changes in the supply chain, Geoff tells us. Drones (above) are still a ridiculous thought for delivering your new TV (a strong gust of wind might send it over to your neighbor), but retail’s last-mile hurdles should make for some game-changing new partnerships. Geoff’s predictions: Amazon could partner with someone holding well-located real estate (like Sears) for delivery/pick-up sites; Uber drivers could deliver packages during their down-time; or the USPS infrastructure could be privatized. He’s excited for what the future holds, along with his upcoming SIOR presidency in 2016 and renewed golf game now that his back is feeling better. Get your event tickets here!