Supply Chain Restructuring in Response to COVID-19 May Lead to More Demand for Industrial Space in U.S.
26 May 2020
Supply chain restructuring in response to COVID-19 may lead to new practices that drive demand for an additional 400 to 500 million square feet of industrial distribution space in the U.S., according to a new CBRE report.
Supply chain disruption—notably transportation restrictions—due to COVID-19 has affected most businesses in the U.S. As a result, many businesses will restructure their supply chains to protect against potential severe disruptions in the future. Likely scenarios will see businesses increasing their inventories to be closer to consumer and manufacturing locations, which will in turn drive demand for more industrial product.
According to CBRE Research, a 5 percent increase in business inventories would translate into between 400-500 million sq. ft. of additional warehouse space demand.
Businesses may also increase near-shoring or re-shoring production to develop a stronger domestic supply chain. While U.S. seaports would most likely be targets for this activity, tight inventory will make that difficult. Therefore, inland hub markets will likely benefit; these include markets like Inland Empire, Atlanta, PA I-78/81 Corridor, FL I-4 Corridor, Memphis, Greenville and Central Valley, CA.
“Many businesses will take the lessons learned from recent supply chain disruptions to build stronger and more reliable domestic supply chains,” said Matt Walaszek, associate director of industrial research at CBRE. “Businesses will increase inventories to avoid product shortages, and, they will establish a stronger domestic pipeline to insulate against the reliance on foreign markets and long-distance transportation. This will continue to drive more demand for industrial space in the U.S.”
To download the report, click here.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.