newsworthy
President Barack Obama recognized
Banneker Industries’ founder, president, and CEO, Cheryl W. Snead, for her
efforts to create a logistics and supply
chain services company, in a speech on
women and the economy. The speech
was delivered at Rhode Island College
in October. … Zebra Technologies Corp.
has completed its $3.45 billion all-cash
acquisition of Motorola Solutions Inc.’s
enterprise business. … Truckload carrier
Celadon Group Inc. has acquired A&S
Services Group LLC, a regional dry van
truckload carrier and warehouse operator based in New Freedom, Pa., for
$55 million in cash and the assumption
of $31.8 million in operating leases. …
Murata Machinery Ltd., a Japanese material handling company better known as
Muratec, has acquired Cimcorp Oy, a
Finnish company that provides logistics
services for the tire industry. As part of
the acquisition, RMT Robotics, a Cimcorp
Oy company that manufactures and integrates robotic gantry-based order fulfillment and tire handling solutions, has
joined the Muratec Group. … Material
handling company Intelligrated is
expanding its operations in China, Brazil,
and Canada. The company has moved its
regional headquarters to newer, more
modern spaces in each of the three
countries. … Orbis Corp. has rebranded its entire line of protective dunnage as OrbiShield. … The International
Warehouse Logistics Association (IWLA)
recently launched an upgraded website,
www.IWLA.com. The new site includes
a customized warehouse search tool.
… Advanced Charging Technologies, a
provider of industrial and electric vehicle
battery chargers, has acquired from its
partner company, BTC Power (BTCP), all
intellectual property rights, engineering
designs, and manufacturing rights for
BTCP’s industrial charging technology.
… Sato, a bar-code printing, labeling,
and EPC/RFID solution company, plans
to establish two new companies: Sato
Global Solutions and Sato International.
short takes and a generally better economy have created a “potent cocktail”
for industrial demand, according to Jim Clewlow, chief investment
officer of CenterPoint Properties, which specializes in developing
transportation and logistics facilities.
The industrial segment is demand-driven, and tenant demand is
demonstrating consistent strength. Space needs were up by 23. 9 mil-
lion square feet compared with the winter of 2013, and on par with
summer 2014 levels, JLL said. In addition, 45 percent of the demand
is for space under 500,000 square feet, a reflection of broad-based
strength and the bullishness of smaller distributors, the firm said.
PENDULUM SWINGS BACK
When the real estate market turned down sharply starting in 2007,
industrial construction nationwide virtually ceased. It stayed frozen
for about 18 months. From 2010 to 2013, deliveries of new projects
plumbed a 50-year low, according to JLL data.
However, as e-commerce growth and low interest rates began
fueling economic activity, developers got busy and once-dormant
markets started perking up. They’ve continued to gain momentum.
Total construction in the third quarter of 2014 rose 16. 5 percent from
the prior quarter and 54. 2 percent from a year ago, according to JLL.
In Atlanta, construction reached 12. 4 million square feet by quarter’s
end, up 104 percent from the end of the prior quarter, the firm said.
Still, there is plenty of ground to cover. New completions at the end
of 2014 will only match 2003 levels, said Dain Fedora, JLL’s research
manager, Americas industrial. Projected new completions hitting the
market next year will only return the sector to 2005 levels, he added.
The market, being what it is, will eventually seek its level. Supply
will continue to increase, eventually bringing it into equilibrium with
demand. But that may not happen until well into 2016. “We still need
that product,” Terkanian said. Meanwhile, landlords who not that
long ago were handing out incentives to entice prospective tenants
and keep existing ones are in the catbird’s seat. “In 24 months, the
pendulum has completely swung,” Terkanian said.
Bigger markets like Los Angeles, Dallas, Chicago, and New Jersey/
central Pennsylvania may find themselves with a supply overhang,
according to Tim Feemster, managing principal of Foremost Quality
Logistics, a consultancy. However, tenant demand should remain
sufficiently strong to keep net absorption levels growing, Feemster
said.
Activity in 2015 will be influenced by how the holiday season pans
out, Feemster said. Busy cash registers combined with a continued
uptick in the overall economy will embolden developers to increase
their capital investments, he reckons.
In this environment, it is hardly a surprise to see rental rates
increase. But that is unlikely to faze producers, distributors, and
retailers willing to pay a premium to be near transportation nodes
and dense population centers. According to JLL, logistics costs—
transportation, inventory, and labor—account for about 80 percent
of a user’s operating budget. Real estate, by contrast, represents only
about 5 percent. Higher rents are “a drop in the bucket” for compa-
nies keen on being where their customers are, Fedora said.
—M.S.
