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Unprecedented Disruption has Reshaped the Future of Logistics

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Cushman & Wakefield releases 2021 Global Logistics Outlook

Cushman & Wakefield (NYSE: CWK), a leading global real estate services firm, has released its 2021 Global Logistics Outlook. The report analyzes key drivers affecting growth, global leasing dynamics and provides an outlook for the sector.    

“The unprecedented disruption caused by COVID-19 pandemic and changing consumer behaviors has reshaped the future of the logistics industry by exposing global supply chain vulnerabilities and accelerating technological advances. As a result, a variety of global trends have emerged, propelling the sector forward in new ways,” said Cushman & Wakefield’s Jason Tolliver, Investor Lead, Logistics & Industrial Services, Americas. 

North America

The North American industrial market experienced growth despite the COVID-19 pandemic wreaking havoc across the globe, as well as more local disruptions including hurricanes and wildfires. It has proven once again to be one of the most resilient asset types. Although North American new supply outpaced demand for the second year in a row, with 378 million square feet (msf) of completions, demand came in at 287 msf, surpassing 200 msf for the seventh consecutive year.

“COVID-19-induced lockdowns did cause a slight slowdown in demand in the first half of the year compared to prior years. However, even this combined with the large volume of supply has still not been enough to fully satiate tenant demand and to allow vacancy rates to begin to rise significantly,” said Tolliver. “Toward the end of 2020, North American industrial vacancy stood at 4.9%—just a 30 bps increase over 2019 and Canadian markets registered the lowest vacancy rates at 2.5% and Mexico City following at 3.0%.”

EMEA

“Europe’s logistics sector is grappling with supply constraints, stemming from a combination of a lack of developable land and strict planning regimes. In contrast to pre-Global Financial Crisis (GFC) when speculative development represented roughly 80% of new construction, post-GFC has been characterized by predominantly built-to-suit development that has led to severe supply shortages in most of Europe’s core logistics markets. As speculative construction resumed post-lockdowns more product came to market, pent up demand was released and leasing activity accelerated,” said Lisa Graham, Head of EMEA Industrial Research for Cushman & Wakefield. 

Based on year-end data, vacancy continues to trend downward in most of Europe’s key logistics hubs. Vacancy of approximately 4% in Dutch and UK markets and vacancy hovering around 2% in Rotterdam, Lyon, Prague and Budapest, points to a severe lack of stock that, so far, a rise in speculative construction has been unable to alleviate. Furthermore, increased demand from e-retailers and 3PLs, as they expand their logistics footprint, has offset any vacancies created through tenant bankruptcies during 2020.

APAC

In broad terms, the regional industrial market remains resilient. Out of the 34 key markets covered within Asia Pacific, 15 are considered landlord-favorable with six being tenant favorable and the remaining 13 in neutral territory. The status quo has largely been maintained year-to-date, with only Singapore showing any significant change to becoming more tenant friendly, though this is restricted to certain parts of the industrial market. This is in stark contrast to the office sector within the region, which has seen a much more definitive shift towards more tenant-friendly conditions.

“Industrial rents have shown steady growth in the year-to-date in key Indian and South East Asian markets where rents in Delhi, Ho Chi Minh City, Kolkata, Jakarta and Hanoi have all increased by over 2.5%. Rents have been held broadly flat in Australia while they have seen a slight uptick of 2% in the Chinese logistics market, due to boosted demand from online shopping soaking up some of the vacancy,” said Dr. Dominic Brown, Global Head of Demographic Insights, APAC-lead for Cushman & Wakefield.

Most Expensive 
RankCountryMarketUSD
   SF/yr
1UKLondon$ 24.90 
2ChinaHong Kong$ 19.93 
3U.S.San Francisco Peninsula, CA$ 18.25 
4SwitzerlandGeneva$ 17.97 
5SingaporeSingapore$ 16.68 
6JapanTokyo$ 14.71 
7NorwayOslo$ 14.68 
8U.S.San Francisco North Bay, CA$ 14.62 
9U.S.Puget Sound – Eastside$ 14.31 
10SwitzerlandZurich$ 13.97 
Least Expensive 
RankCountryMarketUSD
   SF/yr
1IndiaHyderabad$2.45 
2IndiaAhmedabad$2.61 
3TurkeyIzmir$2.79 
4TurkeyAnkara$3.07 
5IndiaNCR$3.27 
6IndiaChennai$3.41 
7U.S.Memphis, TN$3.61 
8IndiaKolkata$3.70 
9GreeceThessaloniki$3.72 
10U.S.Columbus, OH$3.95 

“The global logistics sector not only showed resilience during the strict first half lockdowns but went on to benefit from consumer and business reactions to the pandemic during second half. Broadening e-commerce, both geographically and by product range, will be a key driver of new space demand over the next decade,” said Tolliver. “In a post-COVID-19 world, there will be greater focus on using real estate to leverage cost across the whole supply chain, better positioning businesses as they navigate a B2C business model, reshoring, inventory management, labor issues, transportation and ESG. Together, these factors will govern location strategy.”

The Inland Empire Business Journal (IEBJ) is the official business news publication of Southern California’s Inland Empire region - covering San Bernardino & Riverside Counties.

Transportation

CA Inland Empire District Export Council (CIEDEC) to Present Cal-Mex Aerospace Expo on Sept. 22

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The California Inland Empire District Export Council (CIEDEC), a diverse group of volunteer trade professionals dedicated to helping develop export sales and thus contributing to the national export program, will hold its inaugural Cal-Mex Aerospace Expo on Sept. 22 at the San Bernardino International Airport (SBD).

The expo’s goal is to raise awareness and connect Inland Empire aerospace & defense (A&D) and space manufacturers with the supplier needs of more than 100 companies in the nearby Aerospace Cluster of Baja California, the largest in Mexico. Companies located in Mexicali and Tijuana, Baja California, are just 2.5 to 3.5 hours from companies in the Inland Empire. Due to geographic proximity and the demand for speed to market, Mexico’s nearby aerospace sectors can provide expanding sales opportunities for Inland Empire A&D manufacturers interested in exporting their products, components, machinery, and services.

“CIEDEC is most pleased to organize this strategic collaboration between the Southern California and Baja aerospace industries,” CIEDEC Chairman Bob Spence said. “This is a necessary linchpin in regional cooperation, which is necessitated by our new world order.”

Aerospace industry experts will share updates on trends and policy; export control/International Traffic in Arms Regulations (ITAR); AS9100 certification and upcoming changes; cybersecurity essentials; drone pilot training; an overview of the aerospace sector in Mexico; aerospace export opportunities in Mexico; doing business in Mexico; and a B2B session.

“Aerospace is one of the largest and critically important sectors for our regional and national economies, and we are thrilled to support the District Export Council’s efforts to promote the growth of U.S. aerospace manufactures through cross-border sales opportunities in Mexico,” said Eduard Roytberg, director of the U.S. Department of Commerce’s Commercial Service office in Ontario, California. The Commercial Service is part of the Commerce Department’s International Trade Administration.

The speakers will include Tomás Sibaja, president of the Aerospace Cluster of Baja California, Mexico; Senior Commercial Specialist Silvia Cardenas (U.S. Embassy in Mexico City) and Senior International Trade Specialist Erica Ramirez (U.S. Commercial Service in the Inland Empire, California); David Graham, vice president of Aircraft & Component Maintenance at Unical 145/Unical MRO; and Kimberly Benson, president and CEO of Zenaida Global and an administrator for the UAS Center at SBD.

“The Inland Empire and Baja California share common interests and values in this sector,” Sibaja said. “The timing is now to engage our companies in business encounters and venture opportunities.”

SBD is the title sponsor for the expo, supported by the U.S. Commercial Service and the Aerospace Cluster of Baja California. Additional sponsors include IAPMO SCB, Alliance Buyers Group, EMG Global Business Solutions, Inc., Tablemation Solutions, ExIm20/20 Group, and ERS Consulting Services.

“SBD International Airport is pleased to support our aircraft maintenance and aerospace partners around the world,” SBD CEO Michael Burrows said. “This vital industry supports all business lines at SBD and airports across the globe.”

Early-bird tickets are $25 if purchased by Aug. 31, and $35 starting Sept. 1. For tickets, sponsorship, and exhibition opportunities, and more information about the event, visit https://www.eventbrite.com/e/cal-mex aerospace-expo-2022-tickets-376792445347. To learn more about CIEDEC, visit ciedec.org.

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Transportation

SMART Airports Conference to bring airport leaders and innovators from around the world to Ontario, California

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Ontario International Airport and Southern California’s dynamic Inland Empire will be on the global stage next week as aviation leaders from around the world gather for the 2022 SMART Airports & Regions Conference.

Ontario International Airport (ONT) and Southern California’s dynamic Inland Empire will be on the global stage next week as aviation leaders from around the world gather for the 2022 SMART Airports & Regions Conference – one of the aviation industry’s largest and most prestigious annual events.

The three-day conference opens Monday, July 18, at the Ontario Convention Center, and will focus on topics ranging from how aviation can inspire new economic opportunities in a post-pandemic world to the role of airports as incubators for innovation in urban development and regional connectivity.

Ontario and the Inland Empire are an ideal location for this global gathering. We have one of the fastest-growing airports in the world, in the heart of one of the most robust population and economic centers in the U.S. And when it comes to innovative multimodal transportation solutions, no region can match what’s being done here to redefine mobility and access while creating new economic development opportunities,” said Alan D. Wapner, President of the Ontario International Airport Authority (OIAA) and Mayor pro Tem of the City of Ontario.

The SMART Airport & Regions Conference is being co-hosted by ONT and the Greater Ontario Convention & Visitors Bureau (GOCVB). Among the more than 50 speakers and presenters will be several leaders from the two organizations, including Wapner, OIAA Commissioners Ron Loveridge and Curt Hagman, the airport’s Chief Executive Officer Atif Elkadi, Chief Capital Development Officer Michelle Brantley and Chief Commercial Officer Dan Cappell, and GOCVB President and CEO Michael Krouse.

The event comes as ONT is in the midst of a historic run that has seen travel volumes exceed pre-pandemic levels for three months in a row, including, in May, the highest number of passengers since the airport’s return to local ownership in 2016. For the past four years, ONT has been recognized by Global Traveler as the fastest-growing airport in the United States, and its role as an economic driver and preferred aviation gateway for millions of Southern Californians is helping to drive significant transit investments across the region. Upcoming projects include zero-emission bus-rapid transit, hydrogen-powered passenger rail and an all-electric-vehicle tunnel from a planned state-of-the-art multimodal transit center.

In addition, ONT plays a critical role in the Inland Empire’s emergence as a global goods movement hub, and today ranks among the Top 10 cargo airports in North America.

“We have a great story to tell – here at ONT and across this great region we serve. The Inland Empire is now the 12th largest – and fifth fastest-growing – metropolitan area in the U.S., with a quality of life that is unmatched. We’ve prepared ourselves to meet those growth needs, while preserving the convenience and positive customer experience that have become our hallmark,” said Elkadi, ONT’s CEO.

“We are thrilled to host this event at Ontario Convention Center and to expose the world-wide attendees to the heart of Southern California’s Inland Experience! Our Convention & Visitors Bureau is here to welcome our visitors and provide information on the amenities and destinations in our region,” said Krouse, GOCVB’s President & CEO.

While the SMART Airports & Regions Conference officially opens on Monday, programs and presentations begin Tuesday. A complete agenda is available here.

 

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Opinion

Supply Chain Delays and Strains to Continue through 2022

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OPINION

By Hema Dey, IEBJ Content Contributor

Managing Price Increases

From the start of the pandemic in 2020, businesses have been absorbing ongoing shocks that impacted operations and the bottom line. The supply chain delays and strains everybody hoped would resolve in 2021 seem set to continue through 2022; while the backlog of ships waiting for berths at the ports of Los Angeles and Long Beach fell to a low of 43 mid-March, experts expect a new surge of goods shipped from Asia after the Lunar New Year to drive those numbers up again. After that, the situation is unclear—the latest lockdowns in Shenzhen threaten to cut off supplies of parts and products when U.S. businesses are already starved from ongoing shortages.

At the same time, the war in Ukraine and sanctions on Russian oil are driving already-high fuel prices even higher around the world. While experts disagree on whether we can expect gas prices to keep climbing or that they’re near their peak, it’s clear significant relief is unlikely soon. That additional expense is unwelcome news for businesses of all kinds.

Knowing the current difficulties will be part of the landscape for the foreseeable future has brought many companies to the unavoidable conclusion that they have to raise their prices to stay in business. If you’ve delayed making changes in the hope that things would pass, you’re certainly not alone—but if you’re coming to the realization that you can’t wait to adjust your prices to reality anymore, then you’re not alone there either.

The Right Way to Handle Raising Prices

When raising your prices is a necessity, how you approach it can make a significant impact on minimizing any negative fallout. Your customers are naturally not going to be happy about seeing their costs go up. Anticipating such dissatisfaction is one reason why businesses put off making price adjustments much longer than they should. However, postponing the inevitable can harm your business and won’t change the factors that make an increase necessary. Here’s what you should be doing to manage price increases wisely.

The first thing to remember is that price increases don’t happen in a vacuum. Beyond simply considering the pressures on your business in terms of your growing costs, you need to know what your competitors are doing, and you need to find out fast. If your proposed price increases are wildly out of line with what the rest of your competition is doing, you could easily lose market share. We can assist in getting an up-to-date view on the moves your competitors are making to help you factor in this critical angle.

Next, you shouldn’t delay price increases, but you should also keep them realistic. Deferring the inevitable will weaken your business’s financial position and increase the pressure to put even higher prices in place when you finally do act. At the same time, you must keep in mind that your customers are almost certainly experiencing the effects of increased fuel costs and higher shipping rates just like you are. When clients feel like a business is taking advantage of a general atmosphere of inflation to boost their own profits at the expense of their customer base, they’re rarely quiet about it. Stick to doing what you have to do to keep your business healthy, and don’t be tempted to pad it.

Finally, this is absolutely the time to revisit your marketing strategy. When prices go up, buyer behavior changes. Review all your keyword searches to understand how these fluctuations may be affecting traffic to your website. Repositioning your business accordingly can help avoid unexpected hits to your sales and leads, and may even lead to new opportunities. 

Seeking Guidance

Trying to adjust to the current economic challenges can feel overwhelming for business owners. You don’t have to go it alone when you’re contemplating significant changes like raising your prices—calling in an expert consultant can give you confidence that you’re taking the right steps for the long-term good of your company and your customers. If you need benchmarking assistance, contact Iffel International here. We can help you take the right steps down a difficult road.

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