Justin Smith, SIOR

In response to anticipated tariffs on Chinese imports, U.S. 🇺🇸 companies are proactively increasing their inventory levels, a strategy highlighted in a recent The Wall Street Journal article. This shift towards maintaining higher ‘strategic stock’ is poised to significantly impact industrial and warehouse leasing across North America. By pulling demand forward, businesses may seek additional storage solutions to accommodate their expanded inventories. This trend couls drive increased demand for industrial and warehouse spaces, presenting substantial opportunities for real estate developers and investors in the logistics sector. As companies prioritize supply chain resilience, the emphasis on strategic stockpiling underscores the critical role of robust warehousing infrastructure in supporting business continuity. This development not only bolsters the industrial real estate market but also highlights the evolving strategies businesses are adopting to navigate global trade uncertainties. Now the question remains for Canada 🇨🇦… Will we a similar trend with “near-shoring” inventories? https://lnkd.in/gfM2YSab

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As Lineage makes headlines with the year's biggest IPO, it's clear that the demand for efficient cold storage and logistics solutions is at an all-time high. For cold storage 3PLs competing with giants like Lineage, and food companies grappling with capacity constraints, there are unique opportunities to stand out and grow. Our Cold & Food Facilities team specializes in providing tailored real estate solutions that help cold 3PLs and food companies optimize their supply chains. Whether it's finding the right existing facilities to expand capacity, developing new cold storage capacity, or creating the right strategic partnerships to facilitate innovative solutions, our team is here to support your growth. With the rise in e-commerce and the evolving food consumption habits, having a robust cold storage strategy is not just beneficial—it's essential. Let's connect and explore how we can help your business stay ahead of the curve, ensuring you have the connectivity, facilities, efficiency and capacity needed to meet market demands and deliver excellence. Together, we can create a competitive edge in this rapidly expanding and evolving industry. #ColdStorage #3PL #SupplyChain #FoodIndustry #CommercialRealEstate #Logistics #Innovation https://lnkd.in/gmixyW5i

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Container volume correlates with warehouse absorption and this graph in the link tells the story. COVID hit in March of 2020 and about 3 months later in May TEU's went from 1.7M to 2.5M. Volume stayed at this elevated level (over 2.3M/month) for all of 2021, tapering off in August of 2022. We were back down to 2019 levels by the end of 2022, but then slowly ramped back up in 2023. Today we are back into those peak 2020 - 2021 volumes. Overlay the absorption activity for warehouse in my home market of Indianapolis and it jives completely. Absorption in 2020 started the year "normal" then ramped up quick. 2021? Insane activity and absorption all year. 2022? The insanity continued but started losing steam by year end. 2023 felt like we were living off occupancy gains from transactions signed in 2022 with not much new getting done. For 2024 activity has definitely picked up and with absorption typically lagging cargo volume by several months, we have reason to be optimistic. The trick will be to sustain these high import volumes and avoid the volatility...easier said than done these days.

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Some interesting quotes from this write up by Freightwaves on a CSCMP "State of Logistics" report 1) "volatility is the normal condition for supply chains" 2) "projected a tightening of capacity and potential upturn in rates by the second half of this year" 3) "ocean volumes recently surged during normal quiet season for shipping" On the industrial real estate side, we have seen a few slower quarters of leasing velocity in the Charleston market, but notice an acceleration as we turn the corner into the second half of 2024. It seems inevitable that tighter market conditions are on the horizon for warehouse and transload space, but as it stands now, there are some great options for tenants to meet the growing demand. https://lnkd.in/e9uVSWPh

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It's fascinating to see how US business profit margins are projected to remain elevated through 2025, driven by substantial investments in recent years. This article perfectly highlights the intricate dynamics of supply chains and the delicate balance businesses must maintain to sustain growth and profitability. #SupplyChainInsights #BusinessMargins #EconomicTrends #InvestmentRisks #Profitability #SupplyChain #BusinessGrowth #Investment #ProfitMargins #logistics #wednesdaywins #cre #sior #industrialbrokerage https://lnkd.in/gAnDdMjm

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Same store NOI declined in Q1 at many large operators. This was inevitable. Slashing street rates will flow through the portfolio rapidly as half the tenants turn over each year. NOI declines may accelerate throughout 2024. Need revenue maximization strategies instead of minimization strategies. Use #commonsense when setting prices. Don’t follow the crowd in a race to the bottom. Offer higher quality service and improve the value of your assets. Appraising properties in this environment is nothing more than guesswork. How can you decide whether to use in-place rents or street rates? #selfstorage #investing #cre #pricing

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Are you curious how the US election outcome may impact global manufacturing and supply chains? Our Prologis Research team has released new research along with their perspective. In short, "tariffs, disruptions and evolving economics are changing global sourcing patterns on the margin, but U.S. logistics real estate remains anchored by domestic consumption." Check out the full report at the link below. #supplychain #globaltrade #logisticsrealestate https://lnkd.in/gdXGEEw5

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Insightful Report on US Logistics from CBRE Research: 📦 Container Volume Exceeding Pre-Pandemic Levels 👷‍♂️ Labor Contracts for 45K Workers Expire in September 🌉 Francis Scott Key Bridge finally re-opens Final point: "Nearshoring" of manufacturing has arrived. Lázaro Cárdenas, Mexico had the highest YOY container volume increase (34.7%) in Q1.

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CNBC today published the article linked below stating, "America's freight recession is nearing its end...with retail orders and rates headed higher." There are just a few problems: [1]: The article cites data from Motive showing truck visits to distribution centers of the top 5 retailers are up 30% year-over-year as evidence. While Walmart, Target, Costco, Home Depot, and Amazon are indeed large entities (assuming these are the 5 retailers mentioned), they are a small fraction of the overall freight market. And I highly question this figure's accuracy, as Census Bureau data aren't showing sharp increases in retail sales in these sectors to match. [2]: The article ignores that Cass's shipments data for June showed a steep slide to the worst reading in 4 years. Cass shipments is directionally very predictive of freight market dynamics. [3]: The article states, "Data across the retail sector shows year-over-year order increases through June, including at department stores, electronics, and apparel retailers with bricks-and-mortar locations (32.9%), home improvement (24.4%), grocery & superstores (22.1%), and discount retailers & wholesalers (13%)." These numbers can't be accurate nationally, as we aren't seeing increases in real sales or real inventories even close to these totals for these industries based on Census Bureau data. Implication: retail trade is NOT the primary driver of domestic trucking activity. Rather, its domestic manufacturing, and domestic manufacturing output continues to be weak. We are finally seeing signs that seasonally adjusted manufacturing output found a bottom in several industries in late Q1/early Q2 2024, but we still have a way to go before this freight recession ends for trucking firms. #supplychain #supplychainmanagement #shipsandshipping #trucking #freight https://lnkd.in/gAUpaa-Q

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Restocking is the word of the day, as the WSJ Logistics Reports: "920,979 Combined loaded container imports, in 20-foot equivalent units, into the ports of Los Angeles and Long Beach in July, 44.2% ahead of the same month last year, 8.5% greater than June and the busiest month for the neighboring ports since May 2022." Which has led to the Inland Empire industrial market showing renewed signs of life in Q2 2024 with leasing activity posting a 24-month high of 11.4M SF and net absorption returning to positive territory at 6.5M SF. New Inventory outpaced absorption but only added 40BPS to vacancy which stands at 6.6%. The retail report today of 1% growth in sales in July along with positive earnings and guidance from WalMart are signals that the above increase in shipping volumes is not an anomaly but a trend.

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Given the excitement about the IPO of Lineage (e.g., https://lnkd.in/gcmAUZn4), I wanted to offer a few thoughts based on available government data. Lineage’s operations fall under NAICS 49312 – Refrigerated Warehousing & Storage. Two charts below. Thoughts: •Top chart shows the number of establishments classified as refrigerated warehouses in the US, from the Quarterly Census of Employment and Wages. Over the past 5 years, that number has ballooned from ~1300 to nearly 1800 by Q4 2023 (most recent data). •Bottom chart shows the producer price index for this sector, which shows the price refrigerated warehouses receive for their services has risen ~30% since before the eve of COVID-19. Data from https://lnkd.in/g6D9qa_Y •One thing to keep in mind; there are thousands more refrigerated storage locations in the USA, but these are categorized in various sectors of wholesale trade. For example, there are over 2,000 establishments categorized as wholesale locations for meat and meat products, and nearly another 2,000 for fish alone (https://lnkd.in/gHYwSxxW).   •In terms of industry concentration, the most recent Economic Census data from 2017 places the four largest players having 42.3% market share (https://lnkd.in/g6t4XhQR). My guess is this number will have dramatically increased when the 2022 Economic Census data are released next year. Implication: very strong growth in number of locations, coupled with strong increases in prices, paint a solid demand picture for refrigerated warehousing in the USA. These data help explain why Lineage’s IPO was the largest so far in 2024. #markets #supplychain #supplychainmanagement #freight #trucking

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Sharing this WSJ article as caught my attention https://lnkd.in/ebRWJRdp. Interesting to see that to date in 2024, 20% of US net new warehouse leasing take-up is by Chinese 3PLs and e-commerce operators (e.g. Alibaba Group, JD.COM, Temu, WesternPost Group etc). Likely changes to the de minimis postal rules (currently no duties payable on overseas parcels of goods with a value below $800) is a possible factor, as is improving fulfilment times, which are far slower than local competitors (Amazon, Walmart, Target). Is this a sign of things to come for the UK market? There are some initial indications that it might. Earlier this year, we noted JD.COM's interest in Currys plc and the attraction of its UK physical footprint (21 distribution warehouses and 300+ retail warehouses nationwide) to supplement its online model. https://lnkd.in/ejwEe6Ep Chinese discounter SHEIN recently launched a 400k sq ft big box requirement in the Midlands’ Golden Triangle. This coincides with their exploration of a UK listing; although there are hurdles to clear on that, particularly around employment rights, including a probable meeting with the House of Commons’ business select committee. Whilst the US and UK markets are materially different from a supply and demand perspective, supply chain trends and network evolution are much more closely related, with developments often flowing through to the European market. Additionally, a combination of increased US tariffs on Chinese goods potentially on the horizon with the Republican win and weakening Chinese economy could see Europe and the UK come into increasing focus for Chinese operators. It will be interesting to see how this unfolds. #logistics #realestate #onshoring

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I have attached a “White Paper” analysis of the US #population trends for 2020 through 2050 for your review. This is a great read with specific #predictions of what the US population will look like through 2050 and how it relates to the #GlobalSupplyChain trends in the US. #Arizona as a state bodes well and how this information relates to our future industrial market needs is really good news.

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Section 301 tariffs imposed in 2018 on Chinese imports reshaped the landscape of U.S. trade. The data shows a significant shift in U.S. imports away from China, with a notable surge of 39% between 2017 and 2022. China's imports, on the other hand, remained relatively stagnant, falling from 21.6% of U.S. imports in 2017 to just 16.5% in 2022. This shift underscores the diversified nature of U.S. imports away from China, with a focus on low-tech, non-proprietary manufacturing. Notably, China lost market share in 16 out of 19 manufacturing sub-sectors , indicating a broad relocation of manufacturing to third countries. The rise of Mexico, Vietnam, and Cambodia as beneficiaries of China's declining market share is evident. Mexican imports saw a notable increase of $111 billion since 2017, while Vietnam and Cambodia experienced significant growth as well. Furthermore, the impact of tariffs extended to some reshoring of production to the U.S., particularly in sectors like semiconductors. A recent USITC report highlighted this trend, emphasizing the tangible effects of the tariffs on reshaping global supply chains. #reshoring #supplychain #future #innovation #3pl #socialmedia Conrad SIOR Global Ken Jon David Cam A.P. Moller - Maersk Rolina James Peter Faraz Greg Meredith AXI IMMO Group Adam Sean

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I have an opinion piece in Transport Topics this month - it discusses what TL carriers need to know about how shippers look at transportation procurement. Specifically, I address the importance of monitoring the Spot Premium Ratio and the New Rate Differential in the markets. Enjoy the short read! #TL #transportation #procurement #spotpremiumratio #newratedifferential https://lnkd.in/esxiuvdP

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A brief window of opportunity is open for logistics companies to secure high-quality space to meet growing and shifting consumer demand before slackening supply limits their options. Demand within the market is growing as evidenced by Prologis Research's U.S. Industrial Business Indicator. The study found consumer activity increased by more than two points in July to 60.6 from its Q2 average of 58.4 as consumption of goods remained stable and inventories were restocked. This is consistent with healthy consumer activity and was driven by a 3% year-over-year increase in retail sales, particularly electronics, apparel and motor vehicle parts. E-commerce sales grew 8.6% year-over-year, compared with 1.2% growth for in-store sales. Prologis attributed this growth to cooling inflation and real wage growth, both of which relieved pressure on consumers. In addition, imports have been growing by double digits, suggesting inventories will increase during the year's second half. Many users are determined to maximize existing space to focus on productivity and cost control, which is leading to modestly below-normal realized demand patterns. Net absorption in the logistics sector amounted to 46 million square feet in the second quarter, a positive trend but below a normal expansionary average of 60 million square feet, said Prologis. However, leasing activity is poised to increase as customers expand their footprints to meet the needs of consumers. Indicators of growth such as customers in the market and proposal activity signal growing competition for space, at least throughout the remainder of the year. Prologis said its analysis suggests a run rate of 180-200 million square feet over the next 12 months.

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This is another excellent article from the Wall Street Journal that provides a brief overview of the geopolitical challenges that the global supply chain is now facing. The United States has in essence provided the world with an 'over watch' of the world's shipping lanes that allowed globalization to happen after WWII. Now that the US is pulling back from that role the world is now facing a future that will be markedly more regional and the impact to supply chains and global commerce will be massive. We are living in a time of V U C A - Volatility, Uncertainty, Complexity & Ambiguity and rapid change is going to remain the new normal.

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As we look ahead to Trump's second term, questions arise about the future of freight and logistics. Will policy changes boost the industry or create new hurdles for shippers? Check out our latest blog, which dives into the potential impacts on LTL freight, covering everything from trade policies to infrastructure developments.

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