Following a four-year slide, leading indicators for industrial real estate showed modest gains in 2011. Vacancies are down and rates have begun to stabilize. While exuberance hasn’t returned, there is some optimism and freeing of capital in domestic markets such that speculative development may return in 2012 after a six-year hiatus.
We see two key trends developing going forward. First, e-commerce distribution is growing faster than any other sector. Retailers and order fulfillment operations are remapping the way we shop, buy and receive finished goods. Given the inconsistent collection of Internet sales taxes, these e-commerce companies are flocking to exempted states. Companies such as Amazon, Wal-Mart and unheard of start-ups are offering same-day delivery. They now have optimized the last-mile delivery process and gotten it right. This is a game-changer for industrial real estate and will ultimately change the landscape across all supply chains.
Second, shippers are increasingly focused on the human resource analytics of their current and future operations. The conversation now transcends traditional unemployment numbers and job postings to labor quality, longevity and depth. Labor frequently represents more than 60 percent of our clients’ cost structure. If you miss on labor, nothing else really matters. For DC site selection, this now rivals transportation as an often-overlooked critical metric.
Entering 2012, we see the landscape changing in industrial real estate. E-commerce and labor will dominate the conversation coupled with continued caution by shippers and logistics companies as they struggle to forecast in an uncertain economy.