The intersection of trade and real estate examined

Supply chain managers are becoming increasingly aware of “location, location,” said spokesmen for NAIOP, the Commercial Real Estate Development Association.

NAIOP, a leading organization for developers, owners and related professionals in office, industrial and mixed-use real estate advocates responsible commercial real estate development and advocates for effective public policy.

“The Intersection of Trade and Real Estate” was the discussion title, and the venue was I.con-The Industrial Conference, presented by NAIOP in partnership with NAIOP New Jersey and SIOR. Issues ranged from the ongoing rebound of industrial real estate markets around the country, to the impact of the expansion of the Panama Canal.

For panelist John Morris, senior managing director, global consulting for Cushman & Wakefield, a current issue affecting logistics is that “manufacturing is coming back to the U.S. The underlying factors from a real estate standpoint are where the product comes from, where it is going, and how much it costs.

“The market fundamentals in and of themselves won’t change dramatically, but with manufacturing returning to the U.S.-re-shoring, as it’s termed-I believe the U.S. will once again become an exporter,” Morris told I.con attendees at the Hyatt Regency Jersey City. “I believe this is more important than the expansion of the Panama Canal, and it will have major implications for industrial real estate in the U.S., particularly in the Southeast.”

“Trade is very relevant to real estate,” agreed panelist John Carver of Jones Lang LaSalle. “It all relates to through-put capacity-what happens when cargo leaves the port directly involves real estate in logistics.”

Asked by moderator John DiCola of KTR whether the Panama Canal expansion, permitting larger ships to access East Coast ports, could be a “game changer” in and of itself, “the Panama Canal is a response to the bigger ships,” Morris said. “The larger ships are the game changer. In any case, the transition of manufacturing to the U.S. is what is really important for its impact on real estate,” he reiterated.

Asked whether, for the near term, increased demand for warehousing is fueling investment demand around the country, “our clients aren’t asking those questions yet,”

Morris responded. But that may be changing: “The net average distance to customers is a significant driver for demand,” he said. “The cost of fuel is a factor. The investment decision is also a tactical one based on what city and state governments can do, in terms of approach and incentives, to attract business.”

Focusing on the competition between New Jersey and Pennsylvania for investment in industrial real estate, “the Pennsylvania market has made a lot of sense from the standpoint of lower costs and the ability to circumvent a congested market,” said Tim Feemster of Newmark Grubb
Knight Frank.

“Five years ago, New Jersey was not aggressive, but that has been changing,” Morris said. “Costs are still higher, but that is also changing, and stronger incentives in place and a stronger culture of business attraction are providing New Jersey with the opportunity to pick up business.”

Jim Tompkins, CEO of Tompkins International, noted in a recent Supply Chain Management Review (LM’s sister publication) editorial that if manufacturing does return to the U.S., it will not come as a result of transportation costs, but rather as a result of innovations in product design and/or process creativity that allow for higher levels of automation and productivity.