Industrial Insights - December 2024
Post Election Shift
Global trade patterns will be reshaped by tariff considerations. Key points include:
1. Consumption remains the primary growth driver for logistics real estate, with e-commerce and supply chain modernization as key factors.
2. U.S. imports have expanded significantly. "Imports into the U.S. have grown by 23% since 2019," requiring continued offshore production despite tariff scenarios.
3. Asian trade relationships persist as China maintains manufacturing dominance, though diversification is occurring across other Asian nations, which have "increased imports to the U.S. by 45% since 2019."
4. Mexico's production capabilities continue rising, with "imports from Mexico grew 39% since 2019," suggesting further near-shoring opportunities.
5. Onshoring and nearshoring will complement rather than replace imports, particularly in high-value sectors like semiconductors and healthcare.
Bold Predictions for 2025
The outlook includes seven significant forecasts:
1. Bulk space rebalancing: Largest buildings (500,000+ sq ft) will see fastest vacancy declines of 100+ basis points.
2. Air cargo surge: International e-commerce will drive double-digit growth in air freight volumes.
3. Brazil's expansion: Rent growth will surpass global averages by over 500 basis points.
4. Construction slowdown: Groundbreakings will remain 15% below normal levels.
5. State legislation: Following California's AB98, other states will propose similar supply-limiting measures.
6. Freight consolidation: M&A activity will accelerate with increased technology investment.
7. Import growth: U.S. imports will grow faster than GDP despite tariffs, with East Coast gaining market share.
Southern California Industrial Market Snapshot
Orange County: Vacancy increased to 3.6% in Q3 2024 (up 150 bps year-over-year), though leasing activity reached 2.4 million square feet—the highest in two years. Average asking rates declined to $1.61/sf monthly.
Los Angeles County: Vacancy rose to 4.8% (up 250 bps YOY), the highest in a decade. Negative net absorption of 2.8 million sf reflected declining occupied industrial space. Average asking rates stood at $1.49/sf.
Inland Empire: Vacancy increased to 7.9% (up 410 bps YOY), driven by large tenants consolidating or reducing space. Despite quarterly declines, year-to-date net absorption remained positive at approximately 9.6 million sf. Asking rates fell 6.3% to $1.19/sf monthly.
Supply Chain Modeling
The firm offers modeling services for companies integrating real estate, inventory, transportation, and labor strategies. Common scenarios include facility consolidation, M&A integration, shipment optimization, automation implementation, and geographic expansion analysis.
Interviews with Industry Leaders
Three podcast episodes explore emerging trends:
1. Warehouse Picking Optimization featuring miiplan co-founder Rob Jensen on optimizing product paths within warehouse operations.
2. Industrial Property Painting with Neal Perry of Industry Coatings discussing value-add cosmetic upgrades for large facilities.
3. Industrial Property Electrification featuring John Gaglio addressing electrical service upgrades and Edison partnership opportunities.