The United States is the world’s largest combined importer and exporter, accounting for nearly 20 percent of annual world trade. All freight moving in, out and within the U.S. amounts to about 17 billion tons annually. By 2020, the total domestic tonnage of freight will increase approximately 67 percent, while international trade will nearly double. Over the same period, most U.S. container ports are projected to double the volume of cargo.
With the steadily growing importance of international trade, the combination of reliability and speed to market has taken precedence over stacking and storing goods. While warehouse space remains a commodity, access to prime transportation hubs is a growing competitive advantage.
The emergence of air, rail and trucking as increasingly important modes for international trade is expanding these global gateway facilities from coastal ports to inland hubs, as well. When combined with access to a strong population base, reasonable barriers to entry that keep supply in check and an efficient transportation and infrastructure network, distribution facilities in global gateway ports may present a compelling opportunity.
The major global gateway locations below are a key element of the larger U.S. freight distribution system, including air, rail, trucking and inland freight hubs.
An increasingly sophisticated network of warehouse and distribution facilities supports this system and make up nearly 60 percent of the total industrial space nationwide.
Two long-term trends are impacting the supply and demand for warehouse space:
- The growing U.S. population coupled with increasing per capita consumption means that more and more products must be shipped, stored and redistributed from manufacturers to the final consumer.
- The increasing reliance on foreign trade has steadily increased the volume of both imports and exports, and is driving supply chain reconfiguration to encourage expanded activity in both existing and emerging port locations.
Traditionally, the distribution of goods has been linked to the place of production. As a result, warehouses and other types of industrial space have been established near manufacturing centers. Those manufacturing centers, in turn, selected locations based on proximity to natural resources, labor pools and transportation corridors. With an increasing percentage of manufacturing moving overseas, access to suppliers and consumers primarily drives the location of distribution centers in the U.S. today.
Locations near hub and gateway cities that have access to efficient transportation networks are preferred, as they offer advantages in both reliability and efficiency.Retailers stocking their shelves with consumer products and manufacturers dependent on materials from disparate distributors are two examples of firms that increasingly rely on just-in-time supply chains. Overall productivity and profit for these firms demand that supplies be delivered on schedule. In making their warehousing and distribution decisions, firms increasingly devote resources to those key markets that offer a combination of access to global and local markets with service from efficient and reliable transportation networks. As logistics and real estate gain importance, prime transportation hubs are expected to be a key driver of development and commercial real estate investment opportunities.
David J. Lynn, Ph.D., National Real Estate Investor.