BOSTON—The “e-commerce-ization” of the country, the reshoring of some manufacturing back to the US and the widening of the Panama Canal are the three issues impacting the US industrial sector the most, Matthew Rotolante, managing director of the Miami office of locally based Sperry Van Ness, tells GlobeSt.com exclusively. All of these factors will play a role in shaping how the sector will change in the next few years.
There’s been no lack of information about e-commerce‘s impact on the US commercial real estate industry, from the construction of mega-warehouses to the redefinition of brick-and-mortar retail stores. But Rotolante says the trend is “changing the way industrial ownership is going out there. Overall, there’s a strong feeling that industrial rents are their way up—for more than a year now folks have been forecasting that.”
According to SVN’s new industrial market outlook, the overall trend shows a slight decline in rental rates nationwide, owing to large drops for functionally obsolete spaces. In urban areas and along logistics channels, though, rent trends will build momentum as the economy improves. The report also says that rental- and occupancy-rate trends have diverged for modern, well-located assets and other properties in less-desirable locations.
Also interesting, says Rotolante, is the reshoring of some manufacturing back to the US from other countries, which, along with post-Panamax, will be worth watching. “It’s interesting to see how that’s all going to play out in practice—how the widening of the Canal does impact the East Coast, in particular. It might change some of the logistical routes that have been in place for many years now. We do see a lot of the smarter money coming into the East Coast areas and looking to essentially take advantage of route shifting.”
For example, Rotolante has been involved in a pilot project for bringing blueberries and grapes through Miami and up to Philadelphia, and the Canal project may change the amount of perishables that come into Miami. “Last year, I helped a group purchase 330,000 square of freezer-cooler product, and there’s now 200,000 square feet of that available.”
Comparing East Coast to West Coast, Rotolante points out that the Port of Long Beach is a lot larger and more active than many of the East Coast ports since the population base it serves is so huge. Because of this, industrial players are taking advantage of the cost savings by buying smaller industrial buildings nearby that can further assemble and manufacture the product that comes into that port.
“A lot of major logistical companies are moving toward bigger, better facilities that have everything they need,” says Rotolante. “And the Inland Empire is a tight marketplace with a lot of spec development going on.”
Post-Panamax may lure larger ships to Miami to avoid the trucking costs involved in getting product across the country from the West Coast, he adds. Projects such as tunnels that leave the ports and go directly on the expressways are being built on the East Coast, and ports in Miami; Norfolk, VA; and Long Island, NY, are making a play for that that business. The larger ships, Rotolante says, need ports with 50-ft. drafts in order to accommodate the larger ships that the Canal will eventually allow through.
Freight from Asia with cargo bound for South America and the Caribbean may also double-load the ships for those markets.