Ongoing disruptions to the global supply chain will impact commercial real estate , but opportunities are available across various sectors .
Everyone is feeling the pinch of the supply chain disruption , whether they are walking by empty store shelves or waiting weeks for a part in a much-needed auto repair . For commercial real estate professionals , that supply chain disruption is creating both challenges and opportunities .
The big question is just how long supply chain disruptions will last — and views from experts are mixed , with estimates ranging from 12 months to more than three years . Although the cargo ships stacked up outside the ports of Los Angeles and Long Beach have become symbolic of the supply chain crisis , problems with the movement of goods go beyond a single bottleneck . “ We have had structural things that were happening before COVID-19 that were heading us toward supply chain disruption ,” says K . C . Conway , CCIM , MAI , CRE , chief economist of the CCIM Institute and principal and co-founder of Red Shoe Economics .
The pandemic also highlighted the dependence the U . S . has on imports from Asia and the dominant role China plays in the global world of manufacturing . “ When China shut down , effectively because of COVID-19 , that was the traffic accident on the 405 that backed everything up ,” says Richard Thompson , international director , Supply Chain & Logistics Solutions , Americas at JLL . Even after they cleared the wreckage and started to reopen , there was a bullwhip effect on the rest of the world , he adds , as demand disruptions traveled throughout the supply chain , from end user to manufacturer . Global supply chains are still dealing with the enormous ripple effects , including large queues of ships at the ports .
Even in otherwise normal conditions , supply chains would be strained by the surge in online sales that occurred at the start of the pandemic . Those companies that were embracing just-in-time supply chain strategies were stuck with low inventory and empty warehouses when e-commerce exploded . “ It ’ s not that the ports didn ’ t work or the logistics infrastructure wasn ’ t working — they just got overwhelmed ,” Conway says .
At the same time , U . S . supply chains were burdened by structural issues that included the country ’ s aging and inadequate transportation infrastructure , as well as new trucking regulations passed in 2018 . The new truck driving logbook rules were put in place to improve safety by mandating rest breaks and limiting behind-the-wheel time for truckers — but wiped out about 25 percent of the trucking fleet capacity , notes Conway . California ’ s regulations , such as a union workforce and restrictions on trucking hours related to air quality , were other issues that exacerbated the challenges . “ All of those things came together in a perfect storm , and to unwind all of those things is going to take some rethinking ,” he says .
Bringing balance back to supply chains is creating both direct and indirect impacts for industry practitioners and the commercial real estate sector . Notably , changes in supply chain strategies are influencing location decisions for logistics companies , warehouse / distribution , fulfillment centers , and manufacturing . In some cases , those site selection decisions are redirecting job and population growth , which in turn drives demand and investment opportunities across property types . CRE professionals also are tasked with helping clients navigate delays in building materials caused by supply chain disruption that creates delays and contributes to higher costs for ground-up construction , renovation , and build-out of tenant spaces .