The United States recently faced a significant supply chain disruption due to the global shutdown caused by the COVID-19 pandemic. This crisis was exacerbated by labor shortages, production shutdowns in China, low inventories, and logistical challenges. Despite efforts to mitigate disruptions in 2021, Newmark experts warn that more challenges lie ahead.
In their recent report titled “When it Rains, It Ports: Supply Chain Disruptions to Influence Industrial Market Activity in H2 2024”, Newmark highlights three potential issues that could impact supply chains and industrial properties across the country.
Firstly, a volatile weather environment poses a threat as forecasters predict an above-normal Atlantic hurricane season for May 2024. The recent landfall of Hurricane Beryl has already caused damage along its path from Grenada to Texas and continues to affect regions with heavy rain and tornadoes. Such weather-related disruptions can have short-term effects on freight transportation timelines and may divert private trucking capacity towards disaster relief efforts.
Secondly, dissatisfied labor is another concern as contract talks between port workers represented by International Longshoremen’s Association (ILA) have been suspended from Maine to Texas. This could lead shippers’ goods being rerouted away from East Coast ports if negotiations continue past the contract expiration date.
Lastly,the ongoing geopolitical tensions between China – which accounts for a significant portion of US imports -and USA may also impact industrial operations nationwide.The Biden Administration’s new tariffs on Chinese goods are expectedto increase import volumes before they go into effect.However,some industrial owners remain cautious due tonew policies or policy changes leading up topresidential elections.This uncertainty has resultedin an increasein demandfor manufacturingand logistics buildingsas companies consider nearshoring or expanding domestic manufacturing operations insteadof relyingon Chinese imports.Newmark predicts this will resultin diversificationofindustrialoperationsacrossstrategicmarketsnationwide,andanincreaseindemandforwarehouseutilizationatair-cargohubsfor time-sensitive deliveries.
Overall, the challenges mentioned above are expected to have a significant impact on the industrial sector. Newmark foresees an increase in demand for warehouse utilization and industrial space in Southwest intermodal markets within a one-day drive of Southern California ports. There may also be diversification of operations across strategic markets, leading to new space requirements nationwide as companies look for alternatives to Chinese imports. This could result in higher demand for manufacturing and logistics buildings as well as increased utilization at air-cargo hubs. The full report can be found on Connect CRE’s website under “Supply Chain Issues and Industrial Impacts”.
