Cushman & Wakefield Tracks How “New Age Of Trade” Is Changing American Cities And Towns

17 Aug, 2006, New York

Major White Paper illustrates how changing global business priorities are impacting real estate across the nation

The development of larger warehouses and distribution centers close to main transportation routes to manage the dramatic rise in imported goods will continue to reshape American communities, according to a new White Paper released today by global real estate services firm Cushman & Wakefield.

“We wanted to get a handle on the pivotal role that changing global trade patterns are having on commercial real estate,” said Maria Sicola, senior managing director of Research at Cushman & Wakefield. “As more warehousing and distribution centers are being built near ports and major inland hubs, some communities and even our rail system are experiencing significant growth.”

Strong consumer demand continues to be fueled by the influx of goods manufactured in low-cost countries and imported through a handful of major ports, said Ms. Sicola. “These goods are flooding into the U.S. through a few major ports and then distributed into markets throughout North America.”

Ms. Sicola said supply chain management, which includes shipping, warehousing and distribution, has become the “number one priority” for many businesses today. “The implication for real estate owners, developers and urban development is enormous,” she added.

With predictions that imports will continue to rise by an annual rate of some 10 percent, Cushman & Wakefield reports that the three following trends will have the greatest impact on commercial real estate decisions and US communities:

1. Use of Larger Ships: Only a limited number of ports have channels deep enough and equipment large enough to handle the largest Post-Panamax vessels. Los Angeles/Long Beach are considered the best positioned to handle these ships and their massive loads. Other ports that can handle larger ships include Oakland, Seattle and Tacoma, Wash., while Savannah, Ga. Charleston, S.C. and New York/New Jersey are racing to complete capital improvement programs that will boost their ability to accommodate these large ships.

The real estate impact of larger ships is caused by the off-loading of cargo to nearby inland locations. For example in Ontario, Calif., about 50 miles inland from the ports, large amounts of land are being used for distribution center development. New locations north of Los Angeles and ex-military bases are also being considered. As well, large multi-functional facilities that combine cross-docks for short-tem inventory and storage space for longer-term inventory are becoming more common in Washington’s Kent Valley submarket.

“California will greatly benefit from the expanding trade volumes because of the abundant amount of goods being imported from Asia, and the massive size of the consumer market in the Southern California region which extends to Las Vegas and Phoenix,” said Michael J. Williams, a contributor to the White Paper and a senior research associate in Cushman & Wakefield’s Portland office. “Los Angeles and Long Beach in particular have the channel depth, infrastructure and the track record for handling large amounts of imports.”

2. Rail Making a Comeback: The increased use of rail has led to strong growth in the warehouse markets surrounding some of the nation's largest interior hubs, such as Chicago, Memphis, Atlanta and Dallas. Once the cargo is delivered to port it can be placed directly onto rail cars for fast shipment to the nation's interior. Rail is more cost-effective than trucks for many types of goods, especially for large shipments that can be transported from ports to holding destinations, such as super-sized distribution centers.

Chicago, Memphis and Dallas-Fort Worth all stand to gain the most from rail's resurgence. These regions have the ability to serve large markets and are located at the intersection of multiple rail lines and interstates. These areas also have major players such as local government, railroads and developers, who are willing to make investments that will keep the rails and the real estate surrounding them growing.

3. Distribution Centers get Super-Sized: The increased use of large, million-square-foot distribution centers is a direct result of the massive flow of low-cost products that are being imported into the United States.

These massive distribution centers are being located on the outskirts of the nation’s most populated areas. Large retailers, such as Wal-Mart, Lowes, Target and Home Depot, are dominant users of these distribution centers. While many of these facilities are built-to-suit for large tenants, there has been a considerable escalation in speculative construction over the past 12 months.

Cushman & Wakefield expects Southern California and Chicago to benefit the most from these new economic developments. Additionally, Houston, New York and New Jersey will also gain. Houston is a rapidly growing area, where large distribution centers are built for generous incentives.

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Cushman & Wakefield is the world’s largest privately held real estate services firm. Founded in 1917, the firm has 189 offices in 57 countries around the globe, and 11,000 talented professionals. Cushman & Wakefield delivers integrated solutions by actively advising, implementing and managing on behalf of landlords, tenants, and investors through every stage of the real estate process. These solutions include helping clients to buy, sell, finance, lease, and manage assets. C&W also provides valuation advice, strategic planning and research, portfolio analysis, and site selection and space location assistance, among many other advisory services. To find out more about Cushman & Wakefield, please call 1-800-376-3133.

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