The chaos at ports is showing no signs of settling. The prices for a wide range of commodities are also continuing to rise. The world is coming to terms with a realization: time alone will not be enough to solve the supply chain issues. It will take money, technology, and a rethinking of the incentives in global business. It will need more ships, warehouses, and truck drivers, none of which are quick or cheap to get. Supply chain concerns caused some of the significant interruptions in real estate. Global manufacturing shutdowns, along with increased demand are continuing supply chain disruptions. Landlords and property owners continue to suffer from supply chain challenges.
Warehouse Space Demand
Inventory management is easier for companies that create or receive things when needed. This effort translates into a less need for warehouse space for stakeholders concerned. But, when the goal is to improve supply chain resilience, the equation changes. In many situations, this entails expanding warehouse spaces. There is a need for extra warehouse spaces to place excess items in case of disruptions in the supply chain. New research from a commercial real estate organization explains the warehouse space demand. Warehouse leasing volume in the United States increased compared to the previous years. Indeed, the national warehouse vacancy rate has dropped while first-year rental rates increased.
Logistics and Building Requirements
Location will have a tremendous impact on local real estate demand. Understanding lead times is a crucial factor in determining location requirements. Additionally, it is critical to know how much inventory to keep with regards to the consumer. Moreover, it is imperative to know how much to hold in reference to the producing facility. The rise of eCommerce has had a significant impact on this, as has the demand for reverse logistics.
Building specifications for prime-grade logistics facilities are always evolving. The reason behind this is due to the rapid pace of innovation. For example, requirements for ceiling heights are increasing to enable automation. This change allows for increased storage density and thus smaller warehouse footprints. Building specifications should follow the needs of the customer.
Shortage and Shipment Delay
We have all had lengthier delivery periods for our parcels. But, supply chain disruptions have always affected the real estate market. Shortages and increasing construction material prices resulted in production issues. Lumber, iron, and steel prices continue to increase. As a result, the cost of building a home has skyrocketed throughout the supply chain issues. Additionally, more people opt to buy existing homes rather than build their own.
It is one thing not to find the exact replacement stove for a rental unit. But, it is quite another not to see any replacement stove for an occupied rental unit. Common repairs to plumbing, electrical, and paint may be unavailable for some time. There is often not enough of an item created and in circulation to keep it on the shelves. Raw materials shortages and production delays are the cause of this shortage. This outcome becomes more complicated with products made overseas. Even if there is not a lack of supplies, the ship, boat, or truck, may not be able to unload for weeks.
Revolutionizing Transportation
Technological innovation is ongoing. However, many of the advances are fragmented into different operational silos. A clear picture of how physical and digital infrastructure might eventually become integrated across the supply chain has not yet emerged. The fact that shipping technologies and trends evolve differently around the world further complicates matters. If innovation is to succeed, it must be available and embraced virtually everywhere. Technological advancements are continuous and ongoing. The real estate industry becomes affected by these realities in various ways. Many of these advancements are across many operating sites. Yet, there is no clear image of integrating physical and digital infrastructure.
Additionally, shipping technology and patterns are evolving at various rates worldwide. This variety of innovations adds to the complication of the matter. If innovation is successful, it must be available and accepted everywhere. Thus, the industry must redouble its efforts to create flexible, adaptable transportation technology. In the end, these innovations must be adjustable to the shifting needs worldwide.
Final Thoughts
The supply chain impact will take months to resolve. Meanwhile, real estate firms may experience increased demand for properties. Moreover, the industry must prepare for technological transformation in the long term. We are already aware of the rising cost of properties, whether to rent or buy and other issues. But, we need to establish the matters with the supply chain to resolve our concerns.
Joe Paras,
Staff Writer/Resource Analyst
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