Commercial development services firm Hughes Marino is keeping close tabs on the international narrative on supply chain strain. Hughes Marino Senior Vice President Alex Musetti says it’s imperative to plan and devise a strategy regarding commercial property purchases and lease renewals during the current climate of supply chain problems.
Musetti says when seeking out warehouse space, it’s vital to assess if the facility best suits a particular brand’s needs.
“If we are confident in where the business will be in seven years, then we should be talking about a seven-to-10-year plan,” Musetti said in a blog post on hughesmarino.com. “If that’s the case, we can discuss long-term strategies like build-to-suit options or long-term leases to lock in a low rate and take advantage of increased improvement allowances.”
However, one of the aftereffects of supply chain dilemmas is a shortage of viable distribution centers across the nation. With the surge of e-commerce during the COVID-19 pandemic, ABC News reports that many industrial areas are running out of room and goods are piling up in U.S. ports. The demand for warehouses is at an all-time high, according to The New York Times.
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“We’ve been talking about supply chain disruptions and the impacts on goods and materials since March of 2020. As the pandemic quickly spread, it changed how items moved throughout the global economy,” Hughes Marino Senior Vice President Mike Paleo explains.
In Southern California, Paleo says they’re particularly concerned about the crunch for industrial capacity because, in spots where warehouses are necessary, that land has already been developed.
“One of the primary reasons behind the increasing cost of developable land is a shortage of land. This results in companies competing over the limited supply available, driving up costs and even pushing out smaller players,” Paleo adds.
The rush for warehouse space has also led to many companies giving a second look to suburban office parks to transform into storage areas, according to courthousenews.com, a nationwide news service for lawyers and the news media.
Americans’ shopping habits shifted during the pandemic as well. “We’re in the peak shipping season now,” Jonathan Gold, vice president for supply chain and customs policy with the National Retail Federation, told courthousenews.com. “A lot of retailers have instigated mitigating strategies to bring in goods early, and it all has to go somewhere.”
Other supply chain problems have been affected by Russia’s war against Ukraine, which is making it more challenging to move goods, according to University of Rochester economist George Alessandria.
“Shipping routes have been blocked, which is slowing down the movement of goods around the world,” Alessandria says. “At the same time, sanctions on Russia have stopped the flow of some goods. Those policies have consequences on the global economy.”
Paleo notes that supply chain interferences have prompted brands to reevaluate their production strategies. Paleo says he and the Hughes Marino team have noticed a significant push for more goods to be produced closer to home.
The New York Times also reports a greater migration of manufacturing getting redirected back to American soil.
“It’s absolutely about being close to customers,” Tim Ingle, group vice president for enterprise strategy at Toyota Motor North America, told The New York Times. “It’s a big endeavor, but it’s the future.”
In fact, Yahoo News is reporting that “nearshoring” — the trend of moving manufacturing back to the U.S. market — could aid supply chain stumbling blocks.
“Right now, there’s a lot of things that have disrupted supply chain,” Paul Wellener, Deloitte vice chair of U.S. industrial products and construction leader, told Yahoo News. “So manufacturers are thinking about: How do they mitigate risk?”
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“As the pandemic quickly spread, it changed how items moved throughout the global economy,” Paleo observes. “Goods shipped overseas caused monthslong delivery delays, drastically increasing freight costs.”
Paleo also points out that every industrial product type has become blended into the mix — from last-mile distribution centers and raw land for containers and trucks to cold storage space — and continues to be in high demand, causing rental rates to soar.
The cold storage market size is on a trajectory to reach $323.6 billion by 2030, reports precendenceresearch.com. According to industry experts at The Food Institute, the desire to obtain cold storage and warehouse space is red-hot and showing no signs of slowing. The pandemic’s impact on the food supply has not only affected commercial property trends, but it has also altered the way businesses brainstorm solutions.
“The bottom line is you can’t sell what you don’t have,” Maurice Christino, vice president at Cento Fine Foods, told The Food Institute.
Despite what’s happening with supply chain stress, Hughes Marino’s team remains committed to staying in a progressive growth pattern. Paleo says Hughes Marino is in hyperdrive to help accommodate the tumultuous market and guide clientele every step of the way.
“We are proud to be able to help our clients navigate their complex buyer and tenant needs effortlessly,” Paleo concludes.