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Posts tagged "warehousing"

Home» Posts tagged "warehousing"

Commercial Real Estate’s Impact on Last Mile Logistics

Posted on July 15, 2021 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Retail No Comments

Logistics is the relay race that materials and goods compete in every day moving across land, sea, and air cargo to the end-user, and commercial real estate is the field on which it all plays out.

The ability for the items we need to make it from the place in which they are created to where the end-user can access them is essential to our existence. When logistics are inefficient or disrupted on even the smallest scale, it takes virtually no time until the world feels the impact of delayed goods. At a minimum, it’s an inconvenience, but it can quickly escalate into a global panic where progress is delayed and prices skyrocket.

We need no better example as to how this plays out in real life than to look at the impact of COVID-19 on the world’s shipping and distribution, specifically here in the United States. The challenges we continue to face with shipping and receiving items overseas, combined with unprecedented labor shortages have caused scarcity, unlike anything our modern world is used to. And the ripples caused by this disruption left virtually no industry unscathed.

This also shines a spotlight on the importance of last mile logistics, which is the final step of the delivery process from a distribution center or facility to the end-user. Many items delayed by COVID-19 were within miles of reach, but without labor and infrastructure to deliver these items within their usual time frame, basic building materials and household items couldn’t be restocked fast enough to keep shelves full.

Shifting the Modern Logistics Model

How does this relate to commercial real estate? Redundancy and the ability to process disruption are two key elements required to support the fast-moving, high-volume requirements of modern-day logistics. And that is particularly true of the “shop-online-and-deliver-to-me” era in which we find ourselves.

Based upon the challenging lessons learned from the global pandemic, logistics are shifting toward a new model that replaces the decades-old “just-in-time” supply-chain model rooted in tens of thousands of physical retail stores in order to meet the demands of a “shop and take home” economy. Therefore, we should expect to see a disruption in commercial real estate demand and use.  There will be less dependency on physical stores and more on modern eCommerce warehouses that will be increasingly automated with less reliance on labor.

The Golden Triangle

We can then expect the rapid continuation of traditional retail big-box stores being replaced by hundreds of millions of square feet of eCommerce warehouses in an effort to follow the modern logistics infrastructure. These new eCommerce warehouse locations are being developed in what some economists have coined as the “Golden Triangle.” The Golden Triangle refers to an area of the East Midlands that has become renowned for its high density of distribution facilities and being home to some of the biggest names in retail.

The Golden Triangle is the epicenter of last mile logistics. This area that makes up the nation’s logistics infrastructure has never been more vital in a post-WWII era, and this includes a dependency on commercial real estate. As thousands of retail stores shutter their brick and mortar locations in the coming months, the demand for commercial real estate space shifts from retail to industrial with thousands of new logistics and eCommerce fulfillment warehouses opening and expanding within the Golden Triangle.

Impact of Current Events

These trends in commercial real estate and logistics will be further exacerbated by current events such as Biden’s plan for a “go-broad” infrastructure bill. This plan proposes a massive $2.25 trillion to fix America’s rundown infrastructure, “green up” the economy and invest in new technologies. Furthermore, there is the pending mega rail merger between Kansas City Southern and Canadian National that will create the first true Class 1 railroad in North America extending from the deep interior of Canada, down through the center of the United States, and on south to the most vital ports and manufacturing regions in Mexico.

And if that wasn’t enough to ensure massive changes coming down the line that will impact commercial real estate and logistics, there is also the industrial REIT merger between Monmouth MREIC and Sam Zell’s EQC in which he is trading in his office commercial real estate model for a new hybrid-powered industrial real estate model that is going all-in on logistics.

What we’re witnessing is a shattered economy that is rapidly adjusting in order to right the many ships that have veered off course in the wake of the pandemic. While there are many unknowns, what we can be sure to expect is widespread, lasting changes sweeping the commercial real estate market – some we’ve seen coming for quite a while, and others that will completely take us by storm.

[Online Resources] Real Estate, agent, broker, buyer, cargo, commerce, Commercial Real Estate, CRE, distribution, ecommerce, Economy, goods, industrial, landlord, last mile, lease, materials, Mike Kushner, office, Omni, pennsylvania, representative, retail, sale, shipment, shipping, tenant, trends, united states, warehouse, warehousing

COVID-19 Prompts Manufacturing Companies to Make Long-Term Changes

Posted on October 28, 2020 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Trends No Comments

According to a new study, more than 90% of companies expect the disruption of global supply chains caused by the pandemic to have long-term effects on their businesses. This has caused manufacturers to closely examine various aspects of their businesses and consider what may need to change, possibly permanently, to adjust to the new COVID-19 reality we are living in.

Furthermore, businesses have begun to realize the importance of continuously monitoring their suppliers, especially those overseas, for risks and disruptions as they try to accommodate many personnel issues, supply chain disruptions, and uncertainty in general.

Keep reading to learn what this new survey and other news sources are reporting about the change to manufacturing and supply chain businesses as the result of the pandemic, and how these changes stand to impact the commercial real estate market.

Widespread Impact in a Variety of Areas

Respondents to the survey estimated that on average about 43% of their entire supply chain suffered some kind of interruption. For the majority of respondents, this was due to fluctuation in supplier pricing and safety restrictions causing orders to be paused or slow to fill. The next most common interruption was the need to find suppliers in other geographic regions due to import/export restrictions, followed by the challenge of suppliers going bankrupt. Many manufacturing businesses didn’t experience just one of these interruptions, but a combination of several which made for an exceptionally chaotic time when COVID-19 first hit. Now that the world has gone on to accept where we are the new reality, at least for the foreseeable future, manufacturing and supply chain industries are shifting from short-term considerations to long-term changes that will make them more stable in the future to sustain a global event in the future.

What this means for commercial real estate: As businesses are reacting to the widespread impact of COVID-19 on manufacturing and supply chain operations, there is a valuable opportunity for commercial real estate owners and investors here in the United States to position their properties as solutions for addressing these changing needs. Businesses may need more space, or a different configuration of space to accommodate their new systems and processes. The more flexible CRE professionals can be with their space, the more they will be able to attract new tenants and even expand their portfolio.

Shift to Reshoring and Nearshoring

In an effort to learn from what this pandemic has already taught us, manufacturing businesses have shifted their focus toward solutions that stand to reduce risk and protect against future shocks as of the likes of COVID-19. Many businesses are taking steps toward retooling their supply chain, and one major shift in mindset is reshoring or nearshoring manufacturing that was once offshore. Reshoring is the process of bringing back overseas supply chain operations to the country of origin and nearshoring is the process of bringing supply vendors closer to the point of origin, from farther overseas destinations. Reshoring and nearshoring an operation’s most vital materials reduces the risk of being held hostage by offshore suppliers.

In that same survey, 97% of respondents said they agree that better visibility into their suppliers is imperative. When various components of a business are broken up and distributed all across the globe, it can be nearly impossible to keep your thumb on all aspects of operations and it can make it harder for these points of operations to communicate effectively with one another. Now more than ever, businesses are seeing the value of keeping their operations within the same country, if and when it’s possible.

What this means for commercial real estate: For commercial real estate owners and investors, this means the demand for industrial space is going to rise. As businesses look to retool their supply chain and bring components back to the United States, they will inevitably seek more warehousing and manufacturing space to accommodate their growing needs.

The Smartest Businesses Are Acting Now

In such a challenging environment, the most forward-thinking businesses are not wasting time addressing vulnerabilities in their supply chains. Many respondents (98%) are planning to take some kind of action to build resilience against future disruptions – and the top courses of action are identifying and employing alternative suppliers, continuous monitoring, and increasing reshoring capabilities. Additionally, diversifying or localizing supply chains are a way to reduce costs, as well as better prepare for future economic disturbances.

What this means for commercial real estate: Now is the time to position your CRE assets as solutions for manufacturing and supply chain businesses. If your space is a fit for such needs, you should market it as such. Be direct in the unique benefits your space can provide a business. For industrial businesses, this means a large and functional space located conveniently for transportation. The Central Pennsylvania region is accessible to major cities and transportation hubs on the East Coast. Commercial real estate space along the I-81 and I-83 corridors will benefit from any beefing up of supply chains and logistics in this area.

With the impact of COVID-19 causing many manufacturing businesses’ to change how and where they make, store, and transport goods, the silver lining is that the Central Pennsylvania is likely to experience an increase in demand for industrial and manufacturing space. This will in turn drive new construction, bring more jobs to the area, and strengthen the overall economy. This is not to overlook the many significant challenges the pandemic has caused to all industries, but it’s at least one path that is headed in the right direction, particularly for industrial real estate in Central PA.

Do you have a question or idea related to manufacturing, commercial real estate, and COVID-19? Join the conversation by leaving a comment below.

[Online Resources] Real Estate, agent, business, businesses, central pennsylvania, Commercial Real Estate, commercial real estate broker, commercial real estate invement, COVID, COVID-19, CRE, distribution, global, harrisburg, industrial, industrial supply chain, Mike Kushner, Omni Realty Group, onshore, overseas, pandemic, pennsylvania, processes, shipping, space, tenant representative, transportation, warehouse, warehousing

First Quarter 2014 Shows Central PA Continues to be Hot Spot for Warehousing, Distribution

Posted on July 10, 2014 by mike.kushner in Commercial Real Estate, Local Market, Trends No Comments

The CoStar Industrial Report for First Quarter 2014 provides us with confidence that Central Pennsylvania maintains its value as a hub for warehousing and distribution. This should come as no surprise considering the area is at the center of many major transportation routes and is within a one-day drive to over 70 percent of the U.S. population.

Many businesses, large and small, have taken note and planted roots in Central PA with one or more warehouse/distribution facilities. Over the years we have seen the ebb and flow of this real estate segment, but we are currently experiencing a state of growth. What are the current trends in industrial real estate in Central Pennsylvania? Let’s take a look at the numbers!

Since last quarter, vacant square-footage has dropped from 18,333,335 to 17,856,244.  The vacancy rate (currently 7.48 percent) continues to trend downward from its high of 9.4 percent in Second Quarter 2010. As a response to this decline in vacant space, the quoted rental rate has risen ever so slightly from $3.88 last quarter to $3.91, the highest rate in over a year.

vacant space

quoted rental rates

Last quarter, net absorption surged to 1,783,592 square feet – the highest number we’ve seen since Second Quarter 2010. However, First Quarter 2014 experienced a drop in this number back down to 477,901 square feet. While net absorption isn’t at an all time high, it still shows that more square footage was leased last quarter than what was vacated. This further demonstrates the health of the industrial real estate market in the area and its demand for warehousing and distribution space.

When viewed at as a whole, these numbers tell us is that Central Pennsylvania continues to be the “go to” location for warehousing and distribution. Looking toward the future, this trend is sure to continue. Two well-known retailers (Nordstrom and Urban Outfitters) will occupy distribution facilities currently under construction totaling over 2.28 million square feet. When complete, the two buildings will be among the largest in the county devoted to distribution and fulfillment.

In fact, 3 of the top 4 properties under construction in the Greater Philadelphia industrial market are located in the Central Pennsylvania submarket. Once completed, these facilities will drive new jobs to the area and pump money back into the local economy. Urban Outfitters aims to create at least 500 jobs and Nordstrom aims to create 369 jobs (within three years and up to 700 eventually).

This market report is a positive sign of industrial growth that should continue to climb. Central Pennsylvania is actively creating an environment conducive to businesses looking for prime warehousing and distribution. The new sites for both Nordstrom and Urban Outfitters are eligible for tax abatements. Additionally, the Urban Outfitters site is in a Keystone Opportunity Zone, which gives it 10 years free of property taxes and most state taxes.

As online shopping becomes many retail companies’ largest revenue stream, the need for central warehousing and distribution will continue to increase – and Central Pennsylvania offers one of the most uniquely qualified areas to fit this booming industry. However, we must keep in mind that the scarcity of sites for more than one million new industrial distribution facilities will limit the supply of new space.

If you were looking to rent warehouse or distribution space, would you choose Central Pennsylvania? Share why or why not by commenting below!

[Online Resources] Real Estate, central pa, central pennsylvania, costar, distribution, facilities, industrial real estate, market report, trends, warehouse, warehousing

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