Tag Archive for: supply chain logistics bottlenecks

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Industrial real estate rents increased and vacancies continued declining through November of 2022 despite a record amount of new supply hitting the market, according to the latest U.S. industrial market report from CommercialEdge.

Released just before Christmas, the report found that rents on in-place leases rose 6.5% nationally year over year, while the national vacancy rate dipped to 3.8%.

The new development pipeline also continued to increase, overcoming inflation-driven backlogs and bottlenecks along the supply chain. There were 742.3 million square feet of industrial space under construction as November ended, CommercialEdge reported.

Port markets led in November in both new leases and in-place rent growth. In line with trends seen in the past two years, Southern California in-place rents have climbed at the fastest rate, driven by double-digit growth in the Inland Empire and Los Angeles. On the East Coast, Boston and New Jersey saw the strongest rent hikes.

 

Source: ConnectCRE

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Anyone who has been shopping recently has noticed it — long expanses of empty shelves, websites with merchandise marked “out of stock.”

Sometimes it’s canned goods in short supply, sometimes paper plates. Earlier this year, popular brands of baby formula became hard to find, sending parents to Facebook groups to chase down supplies. Meanwhile, the price of new and used cars continues to climb, due to shortages of critical parts and computer chips — while builders complain that they can’t get the drywall and hardware they need to finish projects.

Americans have been accustomed to goods that magically appeared whenever they were required. With a pandemic hitting hard at manufacturing facilities and shipping lines, consumers are learning hard lessons about the details — and vulnerabilities — of the nation’s supply chain. But key Florida leaders also see opportunities to take this short-term crisis and translate it into long-term gain for the Sunshine State. If Florida does this right, the benefits could outlive COVID-based kinks in the flow of merchandise, providing a permanent boost in the quest to diversify the state’s economy.

Some of the measures will take time and lots of money — but talk is free, and we give Gov. Ron DeSantis and other state leaders credit for their aggressive promotion of Florida’s alternatives to the congestion at West Coast mega-ports. DeSantis, in particular, has been beating the drum for months, and it’s the right time to make the pitch. This week, shipping analysts celebrated the fact that only 76 ships were waiting at the massive Los Angeles/Long Beach ports, a three-month low — but transit times from the time container ships leave Asia to the point where the cargo is unloaded onto U.S. soil have more than doubled since the pre-COVID era, reports American Shipper magazine. Northern ports, including New York, are also reporting delays.

Some of that traffic is already diverting to Florida, with shippers calculating that the two-week detour from the west coast, through the Panama Canal and into one of Florida’s 15 deepwater ports makes more sense than lingering at sea for an extra month or two. Not all of Florida’s ports can handle the biggest container ships, but Port Tampa Bay, Port Everglades, Port Miami, Port Manatee and North Florida’s JAXPORT are already seeing increases in various types of cargo including bulk materials, automobiles along with the standard 20-foot containers used to bring consumer products from manufacturers in China, India and other foreign manufacturers. That’s a welcome change from 2020 when port activity dropped by a significant 16 percent, the Florida News Service reported.

That traffic augments Florida’s long-held position as cruise capital of the world. The cruise industry is still in recovery mode, but once the pandemic threat fades it should send traffic at the state’s ports (particularly Port Miami, Port Everglades and Port Canaveral, the world’s three busiest cruise ports) surging once again.

There are reasons Florida ports haven’t been as attractive to importers. Along with the obvious geographical challenges, there’s a lack of infrastructure needed to support a more robust flow of cargo. And Florida leaders must recognize that ports are only one part of the picture. The state’s ground transportation network must be robust enough to handle the flow of inbound cargo — and while lawmakers don’t need to revive an ill-conceived and costly scheme to construct “roads to nowhere” that cut across largely vacant land, they should plan on improving the state’s most important arteries for truck traffic, along with augmenting the rail system to move cargo, vehicles and materials quickly and cleanly.

There’s one more clear priority: As Florida pushes to expand its ports, it must set the national standard for environmental stewardship. While shipping and distribution support an estimated 900,000 jobs in the state, that number is dwarfed by the 1.7 million jobs generated by Florida’s tourism and hospitality industry. Florida already has a lot of damage to repair, particularly in the sensitive Indian River Lagoon. The state shouldn’t risk more degradation when it could instead lead the way in responsible port expansion.

Still, Florida leaders are right to see the snarled shipping situation in the nation’s biggest ports as a golden opportunity. Lawmakers are ready to invest in port infrastructure, adding to hundreds of millions in federal funding Florida ports have already received. In his budget outline, DeSantis requested $117 million for port improvements, and the House and Senate appear ready to top that – their preliminary plans include nearly $136 million for ports. In a year where Florida has plenty of money to spend — including the one-time deluge of cash from Washington — these investments in the state’s economic future make sense.

 

Source: Orlando SunSentinel

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South Florida’s industrial market fundamentals, particularly for bulk warehouse space, blew through the third quarter of 2021 on strong leasing demand and new construction

The region’s healthy consumer market and growing population helped push investor and occupier confidence in the industrial market, which is likely to continue through 2022.

The backlog at West Coast ports is causing weeks of delays for goods that need  to travel to East Coast markets, making warehouse/distribution space in South Florida an attractive and faster alternative from a distribution standpoint. Bottlenecks in the supply chain are realigning how many firms view real estate needs locally with a shift in philosophy for inventory management.

Previously, companies focused on lean supply chains where materials and goods arrive “just in time.” In a market like South Florida, that meant limited amounts of warehouse space were needed.  Now, companies are turning to an inventory strategy that follows a “just in case” model, where more goods are stored closer to customers to minimize fluctuations in demand. South Florida, with three deep-water ports, has the capacity to address the immediate logistics needs for companies with changing inventory strategies.

In the last year, 18,200 new industrial and warehouse-related jobs were created in Miami-Dade, Broward and Palm Beach counties. They were added because of big-box expansion by e-commerce firms, together with a push into last-mile facilities. Hiring also occurred with traditional retailers, plus new-to-market entrants, which increasingly viewed the tri-county as a strategic location to serve the immediate needs of customers.

New inventory and aggressive development captured some of the new employment. In the first nine months of 2021, 5.4 million square feet of new industrial space was delivered in the region. As the industrial inventory and deliveries grew, so did the occupiers’ space requirements for square footage, but new construction could not keep up.

As of the end of the third quarter, 6.6 million square feet of industrial space was under construction, with three projects representing 1.8 million square feet of new inventory. Still, overall industrial vacancy in South Florida fell to 4.4 percent in the third quarter. Both Miami-Dade and Palm Beach County were even tighter at 3.3 percent, with Broward County coming in at 5.9 percent as available space throughout the region decreased year-over-year.

While not a record-setting year yet, new leasing activity year-to-date of 11.6 million square feet was only 18 percent less than the full amount for all deals done in 2019. Net absorption, or the amount of space absorbed by tenants, was 7.8 million square feet in 2021. That represents a 250 percent increase in the amount of space absorbed when compared to 2020.

yc37i south florida industrial absorption The South Florida Answer to West Coast Logistic Bottlenecks

In Miami-Dade, leasing reached more than 6.8 million square feet year-to-date, an increase of 15.5 percent compared to the same period one year ago. For that same period, Broward County recorded more than 3.6 million square feet, a 36.1 percent rise from 2020. Palm Beach County had 1.0 million square feet in new leasing activity so far in 2021.

Limited availability on heightened demand allowed landlords to push asking rates to all-time highs. Overall average asking rents for all South Florida were at $9.87 per square feet, triple net, the highest amount recorded. Rents in Miami-Dade were at $9.17 per square foot, a 7.1 percent jump from last year. And Broward County also reached an all-time high of $10.27 per square foot in the third quarter. Palm Beach County topped out at $11.07 per square foot with the asking rate rising steadily over the last three quarters as construction picked up.

AfGHE south florida industrial rents e1637699131823 The South Florida Answer to West Coast Logistic Bottlenecks

Confidence in South Florida’s economy and potential for growth will only be enhanced by the lifting of U.S. restrictions on foreign travel. The influx of travelers and investors from overseas, starting over the holidays, will contribute to additional optimism in industrial market fundamentals in the region. The longer that challenges remain at West Coast ports to efficiently move goods into the United States means that South Florida becomes the better, more reliable strategic alternative for companies. The region’s positive fundamentals post pandemic,including solid population growth and rising incomes, make South Florida an attractive market for investment.

 

Source: Commercial Observer