Download Andover-2013-Global-Logistics

Prepared By: Curtis D. Spencer, President
IMS Worldwide, Inc.
IMS Worldwide, Inc.
• 35 Years of Industry Experience
• Over 300 FTZ Projects Conducted
• Applications (New Zones, Expansion, ASF,
MBMs, Subzones, etc.)
• Activations
• Manufacturing Authorizations
• Strategic Development and/or Marketing
Partner to top REITs, Developers and EDC
groups
• C-TPAT and Supply Chain Security Audits
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Foreign-Trade Zone, Logistics and Supply Chain Consulting
IMSW Overview of National FTZ
and Strategic Development
Projects 1977-2012
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Agenda
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What is Industrial Real Estate in 2013?
How Trade Impacts Real Estate
Logistics and Transportation Trends
Panama Canal
Shifts in E-commerce Fulfillment Centers
Impact on Industrial Real Estate
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Zone, Logistics and Supply Chain Consulting
What is Industrial
Real Estate in 2013?
• Manufacturing Buildings: The “norm” in 1950-1970,
then manufacturing shifted to Mexico, then China in
2001. Now we are seeing it come back to North
America
• Growth of E-Commerce Fulfillment Centers
• Continued demand for cross-dock, transload,
distribution and warehousing facilities in growth markets
• Export Centers for consolidation of containers and
goods
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Top Industrial Real Estate US Markets
4th Quarter 2012
Market
Total Market
Space (SF x1000)
Availability
Rate
NNN Asking
Rent
Greater Los Angeles
1,653,763
8.3%
$6.18
Chicago
1,191,438
9.1%
$4.05
New York-New Jersey
800,264
10.25%
$5.24
Dallas-Fort Worth
709,063
13.6%
$3.82
Atlanta
547,781
17.6%
$3.34
Detroit
509,918
11.0%
$4.50
Houston
447,239
8.9%
$3.91
Phoenix
277,424
13.6%
$7.08
Columbus
208,207
12.7%
$2.78
Other Key Distribution Markets:
Source: CBRE 4th Quarter 2012
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How Trade
Affects
Real Estate
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Trade Impacts Real Estate
• Shifts in all industry levels can directly impact the
size, shape, type, locations, infrastructure and
demand levels for real estate
• Manufacturing–Shift of building type: From smoke
stack to high-tech and from off-shore, to near-shore
• “Retail” now involves Industrial buildings! (Ecommerce fulfillment centers, traditional Distribution
Centers (DCs), etc.) Transportation (new routes,
infrastructure, trends)
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SLIDE FROM 2005, SHOWING THE CONNECTION BETWEEN GDP AND TRADE
Notice 2x to 3x Trade Volumes to GDP relationship exists “+ or –”
Real Exports to US in TEUs
NOW -- THAT TRUTH IS IN QUESTION!
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2012 Total TEU Growth YOY vs. 2011
2012 TEU
Volume
2012 TEU Growth
over 2011
LA/LB
14,123,376
1.70%
NY/NJ*
5,520,211
.30%
Savannah
2,966,221
0.7%
Oakland
2,344,424
0.1%
Houston
1,922,479
3.0%
Hampton Roads
2,105,887
8.92%
Seattle
1,869,492
-9.2%
Tacoma
1,711,133
8.62%
Charleston
1,514,585
9.6%
Port of Entry
Source: Individual Port Websites
*Estimate based on Nov YTD numbers
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Transportation
Trends
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and Supply
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Zone,
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Panama Canal
• Canal operating at capacity today
• Limited ship-sizes that can operate, 110 feet wide
max, going to 185 feet wide!
• Impact on USEC and Gulf Ports
• Completion date; Dec 2014, start up Q1 2015
• Main “shift” will not be in West Coast, vs. East
Coast, Asia-traffic market share, but in 1 ship
carrying 12,000 TEUs vs. 3 ships carrying 3500
TEUs each!
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THE PROBLEM!
`
THE FIX – up to 12,000 TEUs
EC Ports Will Grow Because:
• Increasing Eastern Europe/Indian Trade- Via the
Suez. “Watch out for Pirates!”
• Increasing S. American (Brazil, Chile, etc.)
• GDP Growth
• Proximity to Major Markets
• Small increase in Asia-US trade through Panama
and Suez routings
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WC Ports Will Grow Because:
• Increasing Asian China Trade (GDP lowered to 7%
Growth Rate for 2013)
• Increasing SE Asia Trade, non-China
• GDP Growth
• Proximity to quicker/cheaper Intermodal Routings
that can penetrate to within 250 miles of East
Coast.
• Small decrease in market share of China-basedUS trade through Panama and Suez routings.
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Panama Canal Bottom Line
• BALANCE – In Market Share after 2014 will be
the answer. Approx. 52%-48% today, 50%-50%
after 2014.
• IF- Ocean Carriers re-work pricing after Panama
Canal Expansion- lowering prices by 30% for all
water, compared to LA/LB + Intermodal, AND the
RRs do not drop correspondingly—you could see
10%-20% Market Share drop from WC to EC.
• Likelihood of this happening? 1 in 10.
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Why are Ports, Inland Ports, and
Shipping Costs Important to Ind. RE?
• The means, method and pathway that goods flow
through the country directly impacts the markets that win
and those that miss out.
• Port and Inland Port markets that retain or absorb a
large amount of the containers that are received have
larger industrial real estate demand and opportunities.
• Still, the most important location decision is based on
demographics (where are the people moving from
2015-2030 and “landed cost”.
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Shanghai to North American Ports: Slow
Steaming Effects –2000 & 2013
Pricing as of April 2013
$1,200
$3,380
36
17
17
$2,226
35
$3,300
34
ShipmentLink.com
Sailing Schedules
From China, it takes about 2Source:
weeks
to bring cargo(Evergreen)
to the west
coast and about 4 weeks to bring it in on the east coast. (2000)
36
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The Future Port Model
• Select port gateways will serve near-port and
inland port distribution and manufacturing
• One, two or more inland ports supported by
truck and rail networks, in state and soon, out of
states
• Increase the connectivity between ports and
inland ports for imports and exports
• Support traditional distribution services with
E-commerce fulfillment services that operate
together from the same facility or separate
facilities
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East Coast-West Coast TEU
Cost Line Equilibrium- Mar. 2013
Cascadia
+38%
Equilibrium
Line Q1 2013
Great Lakes
Horseshoe +10%
Atlantic
Seaboard
+12%
z
Southland
+35%
I-35 Corridor
+40%
Valley of
the Sun
+81%
Gulf Coast
Belt +31%
Sources: Population, employment, and real estate growth forecasts by
Robert Lang and Arthur Nelson of the Metropolitan Institute at Virginia Tech
and Phil Hopkins of Global Insight; Business 2.0, November 2005
I-85 Corridor
+35%
Southern
Florida
+52%
New Types of Industrial Real Estate:
Export Centers & E-Commerce
• Export Centers match up empty-import
Containers with Export Loads.
• Where? At Inland Ports!
• E-commerce fulfillment center (like DC’s)
are going to be different, larger, more
diverse and in different markets.
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Many Areas are Significantly Imbalanced
…But This Can Be Addressed
Source: JOC Piers 1/30/13
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Export Center
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Retail Trends
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E-Commerce Fulfillment
Types of E-Commerce
• E-Commerce = Electronic Commerce
(Computer, Laptop, Desktop)
• M-Commerce = Mobile Commerce (Phone,
tablets, readers etc.)
• S-Commerce = Social Commerce (Derived
from Social Networks such as Facebook,
Twitter, Groupon, etc.
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Projected Impact of
E-Commerce
• By 2025 it has been estimated that
Ecommerce will represent 30% of all Retail
Sales and account from 2.7 trillion in total
sales (Source: Dematic)
• Within 5 years, the percentage of sales
closed at physical stores vs. alternative
sales channels (E-Commerce, M-Commerce
and S-Commerce) will drop from 91%
(today) to 76% (Deloitte Study)
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E-Commerce Impact on Industrial
• One-third of all demand for big-box space in
the US in 2012 was tied to multi-channel retail
or E-Commerce (Area Development Magazine, 2013)
• The E-Commerce generation of industrial is up to
5 times more labor intensive than traditional
retail/distribution: more parking, mezzanine buildouts and increased automation are some of the
features difficult to retrofit to older buildings, but
many can be converted. (Area Development Magazine, 2013)
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E-Commerce Key Criteria
for Site Selectors
• Avoidance of Nexus Tax (may get mitigated,
but not yet….)
• Proximity to major markets
• Inexpensive land
• UPS and FedEx Truck Hubs nearby
• Ample seasonal/surge labor pool
• Reasonable proximity/access to interstates
• Local incentives: Tax breaks—FTZ!!
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Bottom Line for Industrial RE?
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Stay in the Markets where the PEOPLE ARE!
Invest where they PEOPLE ARE GOING TO BE!
10 and 20 year Demographics are changing.
Northeast did not sustain the “hit” that everyone
predicted, because of the Recession.
• Florida and PHX actually stayed the same from
2008-2010. PHX and HOU fastest growing metros
last 12 months.
• Look for where the demographic trends are likely to
emerge in 10 year segments and plan accordingly.
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Megapolitan Outlook
2010-2030 (Post-Recession)
Cascadia
+38%
SUSTAINS
Great Lakes
Horseshoe +10%
DECLINES
z SUSTAINS
Norcal
+35%
Atlantic
Seaboard
+12%
SUSTAINS
Southland
+35%
SUSTAINS
I-35 Corridor
+40%
GROWS
Valley of
the Sun
+81%
SLOWER
RATE OF
Sources: Population, employment, and realGROWTH
estate growth forecasts by
Robert Lang and Arthur Nelson of the Metropolitan Institute at Virginia Tech
and Phil Hopkins of Global Insight; Business 2.0, November 2005
Gulf Coast
Belt +31%
GROWS
I-85 Corridor
+35%
GROWS
Southern
Florida
+52%
SUSTAINS
Top Domestic
Migration States (2001-2010)
Rank
2001-2006
2007-2009
2010
Census Estimates
ACS
ACS
1
Florida
Texas
Texas
2
Arizona
North Carolina
North Carolina
3
Texas
Arizona
Florida
4
North Carolina
South Carolina
Arizona
5
Georgia
Georgia
Colorado
6
Nevada
Oklahoma
South Carolina
7
South Carolina
Washington
Virginia
8
Tennessee
Colorado
Pennsylvania
9
Virginia
Virginia
Washington
10
Washington
Utah
Kentucky
Source: Census and American Community Survey
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Conclusion: What Does
This All Mean to Me?
• Recession is over, but growth is slow.
• Supply Chains create need for more space. (ECommerce and export centers)
• We are seeing this now in continued consolidation to
large “Big Box” DC’s.
• New E-Commerce phenomenon will create more
demand for Industrial Space.
• Incentives (like FTZ, large truck courts etc.) will
continue to distinguish Big Boxes.
• Never forget…We add 4 Million new mouths to feed
each year in the USA!
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Foreign-Trade Zone, Logistics and Supply Chain Consulting
Prepared By: Curtis D. Spencer, President
IMS Worldwide, Inc.