How Toilet Paper Hoarding Could Benefit The Industrial Sector
The stockpiling of products at the onset of the coronavirus pandemic may spawn additional demand for industrial space, Dallas-Fort Worth industrial experts claim.
Hysteria as the virus took hold in the U.S. led millions of Americans to stockpile essential household items like toilet paper, creating supply chain disruptions that retailers and manufacturers never expected, CBRE Global Industrial & Logistics Vice Chairman Jack Fraker said.
The end result of this toilet paper craze is more industrial end users could take extra space to ensure they have emergency stockpiles of products in the future, according to Fraker, who spoke at Bisnow's Future of Industrial webinar this week.
This would be a complete reversal of how U.S. supply chains operated prior to the coronavirus pandemic and a real boon for industrial owners.
“It was looked at as an additional cost if you carried too much inventory,” Fraker said. “The trend in corporate America was to implement perfect supply chain models, so when an item such as toilet paper is sold out of the grocery store, there is already a truck pulling up the same day with a new load of toilet paper.”
That all changed when toilet paper shortages at the beginning of the healthcare crisis disrupted the timing between the dissolution of a retailer's inventory and the delivery of replacement goods.
“Everybody went out and hoarded toilet paper, so that was a major supply chain interruption, and most of these big corporate real estate supply chain executives don’t want to see that again in the future,” Fraker said.
“If there is a silver lining to some of this crisis, it is corporate occupiers or tenants are going to build in some safety stock and additional capacity for inventory in their warehouse.”
Duke Realty Regional Senior Vice President Jeff Thornton also sees demand for access inventory picking up in Dallas-Fort Worth. And as the need to store extra inventory picks up, so will demand for warehouse space.
“All I know is our guys here in Dallas, Texas, are working on four different deals with existing customers of ours ... about expansion,” Thornton said. “You are hearing terms like inventory resiliency and safety stock. There is an overwhelming thought that a lot of these larger tenants in particular are going to take down more space in order to weather storms like this and be able to be a bit more prepared in case there is a disruption in the supply chain.”
Fraker's team members put some numbers behind their assessment of how clients storing additional product nationwide could impact industrial space demand.
“It’s happening all across the national inventory,” Fraker said. “Our research had extrapolated some math and [found that] if all of these tenants take an additional 5% of safety stock, over time that's going to create an additional 500M SF of tenant demand that wasn’t in the forecast at all, so that safety stock of 5% is going to be huge for our industry.”