of the infrastructure , demographic growth and shifts , and the fiscal health of states and cities , notes Conway .
Ports are still a prime focus because the U . S . is still an import nation . The ports have done a really good job in keeping up with infrastructure by dredging deeper channels , adding cranes , and supplying terminal space that can handle bigger ships . However , other infrastructure — such as intermodal rail , highways , and utilities — must connect to ports , notes Conway . Companies look for insights on infrastructure in the American Society of Civil Engineers ’ quadrennial infrastructure report that identifies weaknesses and where more investment is needed in the nation ’ s highways , bridges , utilities , ports , and rail networks . “ Companies are not going to go where there is failing or underfunded logistics infrastructure ,” says Conway .
Another challenge for logistics companies is that people sitting at the end of some last-mile supply chains up and moved during the pandemic . People relocated out of major urban centers such as New York and San Francisco and scattered to the suburbs , secondary and tertiary markets , or different parts of the country that were less impacted by COVID-19 . Migration reports published by U-Haul and North American Van Lines offer some clues as to where people are moving and where supply chains need to expand or contract . According to U-Haul , Tennessee was the number-one state for inbound migration , followed by Texas and Florida .
Overall , demand for space is widespread across the country . “ Where we have seen some outperformance is in key locations
LOGISTICS FIRMS REMAIN HUNGRY FOR SPACE
along supply chains and near large populations , such as Southern California , New Jersey-New York , Dallas , Atlanta , Central and Eastern Pennsylvania , and Indianapolis , to name a few ,” says Andrus . There are some good consumption drivers and barriers to new supply in those areas , which have produced some outsized growth , he says . However , it is a little bit of a high tide raising all boats , since secondary and tertiary markets also are benefiting from the demand for space . Supply chains are still serving those secondary and tertiary markets , just at a different scale , he adds .
CLEARING OBSTACLES Consumer expectations for fast delivery are driving the race for quicker , cheaper lastmile solutions . “ We are getting more and more used to getting things not only same day , but in the case of things like groceries , even in the same hour ,” says Fisher . Those solutions often target close-in real estate opportunities . In Indianapolis , that demand has pushed values higher for older warehouse facilities that are more centrally located to the population .
In Chicago , the O ’ Hare market has been going through a redevelopment cycle for the past 15 years , where older manufacturing facilities are being razed to make way for new , more efficient Class A distribution space . “ We ’ ve seen that for a long time in O ’ Hare , and now we ’ re seeing it in the closer-in suburbs and in Chicago itself ,” notes Marshall . “ Amazon is the leader in supply chain strategy , and they have probably perfected the last-mile supply chain , but we ’ re starting to see others follow suit ,” he adds . For example , instead of having one or two large distribution centers in suburban Chicago , Amazon is sprinkling these facilities throughout the metro area . In 2020 alone , Amazon committed to over 14 msf of new leases or build-to-suits in greater Chicago , notes Marshall .
Demand for last-mile locations is driving solutions that include occupiers that are willing to accept older facilities in as-is condition . For example , Prologis purchased the former Greyhound bus terminal in the Arts District in downtown Los Angeles . The 120,000-sf facility sits on eight acres and also has rooftop parking . Although it is an older facility with 18- to 22-ft . clear heights , Prologis has several potential users that are interested in the facility as-is because of its dense urban location , parking , and drive-thru capability that make it a nice delivery location , notes Andrus . “ Real estate is location , location , location , but particularly so with some of these last-touch , last-mile facilities ,” he adds .
Struggles in the retail sector that have been further compounded by the pandemic could potentially create opportunities for retail-to-industrial conversions in big-box retail and distressed malls . Retail locations have long been discussed as an attractive
Struggles in the retail sector that have been further compounded by the pandemic could potentially create opportunities for retail-to-industrial conversions in big-box retail and distressed malls .
alternative for last-mile distribution due to proximity to dense population areas . Some of the stumbling blocks to those conversions have traditionally been high land and building costs , neighborhood resistance , and difficulty in obtaining needed city approvals and zoning changes . “ On paper , repurposing retail centers to industrial makes a lot of sense , but the reality is that it is difficult to do ,” says Marshall . However , more success stories could provide some added traction for those retail-to-industrial conversions .
Last mile has the potential to be very efficient , but it ’ s going to depend on significant advances and applications of new technology . Additionally , supply chains will need to continue to evolve along with new technologies and new delivery models and methods . Drivers , for example , are all fighting for curb space for pickups and deliveries . “ I think we are going to see a lot more of that , and it ’ s going to have to be solved by technology ,” says Dohm . Companies will need to rely more on apps , cellphone location technology , autonomous vehicles , drone aircraft , and robots . In the future , that technology will drive greater efficiencies across supply chains and open more location opportunities , making it feasible for companies to squeeze into older , infill locations , he adds .
Beth Mattson-Teig Freelance business writer based in Minneapolis .
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