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 industrial property sector is partying like it's...well...2005.
The market—which lumps together manufacturing, warehouse and distribution center, transportation, and logistics
facilities—is experiencing one of its strongest cycles in years. Warehouse rents are rising, with the average rental
rate up 4.4 percent from a year ago, according to JLL, a real estate and logistics company. CBRE Inc., a huge developer, pegs
the year-on-year gain at about 3.1 percent. In the southern California market, home to the country's largest seaport complex,
rents are up nearly three times that, driven by huge demand for port-centric property as well as the need for more cross-dock
space to handle the transloading of goods from 20- or 40-foot marine containers to 53-foot boxes moved inland via truck or rail
intermodal.
Vacancy rates nationwide in the third quarter dropped to 7.2 percent, the lowest level in six years, according to JLL data.
Vacancies in red-hot markets like the Lehigh Valley in central Pennsylvania have dipped below that, hitting levels not seen for a
decade or more, according to Jake Terkanian, vice president of the global industrial services group at CBRE. Nationwide
availability, which tracks current vacancies and space that will become available in the next six months, reached their lowest
levels in the quarter since the first quarter of 2008, according to CBRE.
Nationwide net absorption, broadly defined as the amount of occupied space less the amount of space vacated, hit 143.8 million
square feet through the first nine months, up 28.5 percent from a year ago, JLL said. Vacancy rates could fall to as low as 6.9
percent in the seasonally strong fourth quarter, when demand for space picks up before the holidays, JLL said. By year's end, net
absorption will reach, at minimum, 185 million square feet, up nearly 10 percent from a year ago, JLL said.
The anecdotes add fuel to the story. In the Lehigh Valley, there are no more 500,000-square-foot "big box" distribution centers
on the market, according to Terkanian, who oversees the region for CBRE. In Bethlehem, Pa., Zulily, a fast-growing e-tailer, leased
out all the space of an 800,000-square-foot distribution center, which was built as a speculative development, about six months
before construction was finished. Out west, Los Angeles has a 1.9-percent industrial vacancy rate, according to Newmark Grubb
Knight Frank, a real estate services firm. About 2.5 million square feet is under construction there.
California's "Inland Empire," where industrial rents are significantly cheaper than in and around the Los Angeles basin, has
been on a multiyear roll as the DC conduit between imports off-loaded at the Ports of Los Angeles and Long Beach and consumer
markets across the west. Ironically, third-quarter vacancy rates have ticked up to 5 percent from 4.8 percent in the prior quarter
and 4.6 percent in the year ago period, according to Newmark data. That could be because of a minor oversupply condition due to
the 12 million square feet under construction there.
Low interest rates, sharply declining oil prices, and a generally better economy have created a "potent cocktail" for industrial
demand, according to Jim Clewlow, chief investment officer of Centerpoint Properties, which specializes in developing transportation
and logistics projects. Should oil prices stabilize at current levels or fall further, that could trigger demand for more distribution
centers, Clewlow said. That's because higher oil prices generally encourage producers, distributors, and retailers to consolidate their
DC networks in an effort to reduce shipping costs and conserve fuel.
The industrial segment is demand-driven, and tenant demand is demonstrating consistent strength. Space needs were up by 23.9 million square
feet compared to the winter of 2013, and on par with summer 2014 levels, JLL said. In addition, 45 percent of the demand is for space under
500,000 square feet, a reflection of broad-based strength and the bullishness of smaller distributors, the firm said.
A VIRTUOUS CYCLE
When the real estate market turned down sharply starting in 2007, industrial construction nationwide virtually ceased. It stayed frozen for about
18 months. From 2010 to 2013, deliveries of new projects plumbed a 50-year low, according to JLL data.
However, as e-commerce growth and low interest rates began fueling economic activity, developers got busy and once-dormant markets started
perking up. They've continued to gain momentum. Total construction in the third quarter of 2014 rose 16.5 percent from the prior quarter and
54.2 percent from a year ago, according to JLL. In Atlanta, construction reached 12.4 million square feet by quarter's end, up 104 percent from
the end of the prior quarter, the firm said.
Still, there is plenty of catching up to do. New completions at the end of 2014 will only match 2003 levels, says Dain Fedora, JLL's research
manager, Americas industrial. Projected new completions hitting the market next year will only return the sector to 2005 levels, he adds. The
supply that went online in the third quarter, while being the strongest quarter to date, is still at levels below the long-term average, adds
CBRE.
The market, being what it is, will eventually seek its level. Supply will continue to increase, eventually bringing it into equilibrium with
demand. But that may not happen until well into 2016. "We still need that product," Terkanian says. Landlords, meanwhile—who three or four years
ago were handing out incentives left and right to entice prospective tenants and keep existing ones—are now in the catbird's seat. "In 24 months,
the pendulum has completely swung," Terkanian says.
Bigger markets like Los Angeles, Dallas, Chicago, and New Jersey/central Pennsylvania may find themselves with a supply overhang, according to
Tim Feemster, managing principal of Foremost Quality Logistics, a consulting company. However, tenant demand should remain sufficiently strong to
keep net absorption levels growing, Feemster adds.
Activity in 2015 will be influenced by how the holiday season pans out, Feemster says. Busy cash registers combined with a continued uptick
in the overall economy will embolden developers to increase their capital investments, he reckons.
In this environment, it is hardly a surprise to see rental rates increase. And that is unlikely to faze producers, distributors, and retailers
willing to pay a premium to be near transportation nodes and dense population centers. According to JLL, logistics costs—transportation,
inventory, and labor—account for about 80 percent of a user's operating budget. Real estate, by contrast, comprises just about 5 percent. Higher
rents are "a drop in the bucket" for companies keen on being where their customers are, Fedora says.
Container traffic is finally back to typical levels at the port of Montreal, two months after dockworkers returned to work following a strike, port officials said Thursday.
Today that arbitration continues as the two sides work to forge a new contract. And port leaders with the Maritime Employers Association (MEA) are reminding workers represented by the Canadian Union of Public Employees (CUPE) that the CIRB decision “rules out any pressure tactics affecting operations until the next collective agreement expires.”
The Port of Montreal alone said it had to manage a backlog of about 13,350 twenty-foot equivalent units (TEUs) on the ground, as well as 28,000 feet of freight cars headed for export.
Port leaders this week said they had now completed that task. “Two months after operations fully resumed at the Port of Montreal, as directed by the Canada Industrial Relations Board, the Montreal Port Authority (MPA) is pleased to announce that all port activities are now completely back to normal. Both the impact of the labour dispute and the subsequent resumption of activities required concerted efforts on the part of all port partners to get things back to normal as quickly as possible, even over the holiday season,” the port said in a release.
The “2024 Year in Review” report lists the various transportation delays, freight volume restrictions, and infrastructure repair costs of a long string of events. Those disruptions include labor strikes at Canadian ports and postal sites, the U.S. East and Gulf coast port strike; hurricanes Helene, Francine, and Milton; the Francis Scott key Bridge collapse in Baltimore Harbor; the CrowdStrike cyber attack; and Red Sea missile attacks on passing cargo ships.
“While 2024 was characterized by frequent and overlapping disruptions that exposed many supply chain vulnerabilities, it was also a year of resilience,” the Project44 report said. “From labor strikes and natural disasters to geopolitical tensions, each event served as a critical learning opportunity, underscoring the necessity for robust contingency planning, effective labor relations, and durable infrastructure. As supply chains continue to evolve, the lessons learned this past year highlight the increased importance of proactive measures and collaborative efforts. These strategies are essential to fostering stability and adaptability in a world where unpredictability is becoming the norm.”
In addition to tallying the supply chain impact of those events, the report also made four broad predictions for trends in 2025 that may affect logistics operations. In Project44’s analysis, they include:
More technology and automation will be introduced into supply chains, particularly ports. This will help make operations more efficient but also increase the risk of cybersecurity attacks and service interruptions due to glitches and bugs. This could also add tensions among the labor pool and unions, who do not want jobs to be replaced with automation.
The new administration in the United States introduces a lot of uncertainty, with talks of major tariffs for numerous countries as well as talks of US freight getting preferential treatment through the Panama Canal. If these things do come to fruition, expect to see shifts in global trade patterns and sourcing.
Natural disasters will continue to become more frequent and more severe, as exhibited by the wildfires in Los Angeles and the winter storms throughout the southern states in the U.S. As a result, expect companies to invest more heavily in sustainability to mitigate climate change.
The peace treaty announced on Wednesday between Isael and Hamas in the Middle East could support increased freight volumes returning to the Suez Canal as political crisis in the area are resolved.
The French transportation visibility provider Shippeo today said it has raised $30 million in financial backing, saying the money will support its accelerated expansion across North America and APAC, while driving enhancements to its “Real-Time Transportation Visibility Platform” product.
The funding round was led by Woven Capital, Toyota’s growth fund, with participation from existing investors: Battery Ventures, Partech, NGP Capital, Bpifrance Digital Venture, LFX Venture Partners, Shift4Good and Yamaha Motor Ventures. With this round, Shippeo’s total funding exceeds $140 million.
Shippeo says it offers real-time shipment tracking across all transport modes, helping companies create sustainable, resilient supply chains. Its platform enables users to reduce logistics-related carbon emissions by making informed trade-offs between modes and carriers based on carbon footprint data.
"Global supply chains are facing unprecedented complexity, and real-time transport visibility is essential for building resilience” Prashant Bothra, Principal at Woven Capital, who is joining the Shippeo board, said in a release. “Shippeo’s platform empowers businesses to proactively address disruptions by transforming fragmented operations into streamlined, data-driven processes across all transport modes, offering precise tracking and predictive ETAs at scale—capabilities that would be resource-intensive to develop in-house. We are excited to support Shippeo’s journey to accelerate digitization while enhancing cost efficiency, planning accuracy, and customer experience across the supply chain.”
Donald Trump has been clear that he plans to hit the ground running after his inauguration on January 20, launching ambitious plans that could have significant repercussions for global supply chains.
As Mark Baxa, CSCMP president and CEO, says in the executive forward to the white paper, the incoming Trump Administration and a majority Republican congress are “poised to reshape trade policies, regulatory frameworks, and the very fabric of how we approach global commerce.”
The paper is written by import/export expert Thomas Cook, managing director for Blue Tiger International, a U.S.-based supply chain management consulting company that focuses on international trade. Cook is the former CEO of American River International in New York and Apex Global Logistics Supply Chain Operation in Los Angeles and has written 19 books on global trade.
In the paper, Cook, of course, takes a close look at tariff implications and new trade deals, emphasizing that Trump will seek revisions that will favor U.S. businesses and encourage manufacturing to return to the U.S. The paper, however, also looks beyond global trade to addresses topics such as Trump’s tougher stance on immigration and the possibility of mass deportations, greater support of Israel in the Middle East, proposals for increased energy production and mining, and intent to end the war in the Ukraine.
In general, Cook believes that many of the administration’s new policies will be beneficial to the overall economy. He does warn, however, that some policies will be disruptive and add risk and cost to global supply chains.
In light of those risks and possible disruptions, Cook’s paper offers 14 recommendations. Some of which include:
Create a team responsible for studying the changes Trump will introduce when he takes office;
Attend trade shows and make connections with vendors, suppliers, and service providers who can help you navigate those changes;
Consider becoming C-TPAT (Customs-Trade Partnership Against Terrorism) certified to help mitigate potential import/export issues;
Adopt a risk management mindset and shift from focusing on lowest cost to best value for your spend;
Increase collaboration with internal and external partners;
Expect warehousing costs to rise in the short term as companies look to bring in foreign-made goods ahead of tariffs;
Expect greater scrutiny from U.S. Customs and Border Patrol of origin statements for imports in recognition of attempts by some Chinese manufacturers to evade U.S. import policies;
Reduce dependency on China for sourcing; and
Consider manufacturing and/or sourcing in the United States.
Cook advises readers to expect a loosening up of regulations and a reduction in government under Trump. He warns that while some world leaders will look to work with Trump, others will take more of a defiant stance. As a result, companies should expect to see retaliatory tariffs and duties on exports.
Cook concludes by offering advice to the incoming administration, including being sensitive to the effect retaliatory tariffs can have on American exports, working on federal debt reduction, and considering promoting free trade zones. He also proposes an ambitious water works program through the Army Corps of Engineers.
ReposiTrak, a global food traceability network operator, will partner with Upshop, a provider of store operations technology for food retailers, to create an end-to-end grocery traceability solution that reaches from the supply chain to the retail store, the firms said today.
The partnership creates a data connection between suppliers and the retail store. It works by integrating Salt Lake City-based ReposiTrak’s network of thousands of suppliers and their traceability shipment data with Austin, Texas-based Upshop’s network of more than 450 retailers and their retail stores.
That accomplishment is important because it will allow food sector trading partners to meet the U.S. FDA’s Food Safety Modernization Act Section 204d (FSMA 204) requirements that they must create and store complete traceability records for certain foods.
And according to ReposiTrak and Upshop, the traceability solution may also unlock potential business benefits. It could do that by creating margin and growth opportunities in stores by connecting supply chain data with store data, thus allowing users to optimize inventory, labor, and customer experience management automation.
"Traceability requires data from the supply chain and – importantly – confirmation at the retail store that the proper and accurate lot code data from each shipment has been captured when the product is received. The missing piece for us has been the supply chain data. ReposiTrak is the leader in capturing and managing supply chain data, starting at the suppliers. Together, we can deliver a single, comprehensive traceability solution," Mark Hawthorne, chief innovation and strategy officer at Upshop, said in a release.
"Once the data is flowing the benefits are compounding. Traceability data can be used to improve food safety, reduce invoice discrepancies, and identify ways to reduce waste and improve efficiencies throughout the store,” Hawthorne said.
Under FSMA 204, retailers are required by law to track Key Data Elements (KDEs) to the store-level for every shipment containing high-risk food items from the Food Traceability List (FTL). ReposiTrak and Upshop say that major industry retailers have made public commitments to traceability, announcing programs that require more traceability data for all food product on a faster timeline. The efforts of those retailers have activated the industry, motivating others to institute traceability programs now, ahead of the FDA’s enforcement deadline of January 20, 2026.