As the COVID-19 outbreak continues to threaten global supply chains, at least one segment of the logistics industry is maintaining a positive outlook: real estate. Although sure to feel negative effects in the short term, logistics real estate is likely to prove resilient in the longer term and generate positive demand via rising inventory levels and accelerating e-commerce adoption, according to a March study by logistics real estate firm Prologis.
But there will be pain before the gain. COVID-19, the respiratory illness that began in China and is now a global pandemic, has slowed manufacturing activity in China and stalled cargo shipments from the region. In a March 6 presentation, executives from supply chain software firm Resilinc reported a 20% drop in ocean traffic from China since the outbreak began and noted that many ships are leaving the region only partially full—in some cases at 20% to 35% capacity. U.S. ports are feeling the effects of the situation; the Port of Oakland reported a 9% drop in February imports Friday, citing the effects of COVID-19 on manufacturing and the supply chain.
Such heightened supply chain risks introduce new long-term trends that could boost demand for real estate, however. Prologis says the slower movement of goods will lead to a shortage of activity in logistics real estate in the near term followed by a replenishment surge later on. Rising demand for e-commerce and increasing diversification of manufacturing locations may also affect the outlook.
Read the complete article from Victoria Kickham at Supply Chain Quarterly>>