Industrial real estate expansion continued to chug along as 2014 drew to an end. In most U.S. markets, demand and construction returned to 2007-peak levels. Vacancy across all markets hovers at 10 percent and speculative construction is roaring back. The real estate industry, however, is merely a trailing indicator. As we look into 2015, what will drive growth and what risks lie ahead?
This year will draw even more attention on optimizing domestic and international distribution footprints. While the impact of e-commerce and omni-channel continues to evolve for all of us, all shippers acknowledge its disruptive effect and must closely scrutinize their current network. Weighing “cost versus service“ investments has never been more important. This applies to businesses as diverse as furniture, food service consumables and, of course, online fulfillment centers. This balance becomes even trickier with Cyber Monday, West Coast port backlogs and increased service expectations.
Driver shortages, and aging workforce, temp labor … these are just symptoms of a greater latent pressure. Coupled with universal job growth and wage stagnation, we see tremendous inflationary and operational risk ahead for shippers in the next two to three years. In fact, labor has become the defining advantage for many companies during new facility start-up. Many companies are also looking at increased automation to counter labor shortages and increase fulfillment accuracy.
2015 will be another year of strong growth but will be marked by an increased focus on infrastructure and operational risks. The industrial real estate recovery will continue and be the beneficiary of capital invested in new facility networks across all industries. In response, we expect more than 40 million square feet of new warehouse space to be delivered next year. Because of business and consumer demand and expectations, the growth will continue at major population centers. Keep an eye on local labor trends and consider the potential returns on more automation to keep these facilities humming along.
Blaine Kelley, Senior Vice President, Global Supply Chain, CBRE