Archives for September 2021

Industrial occupiers would rather pay more for rent than for transportation costs.

As supply chain issues grow around the country and around the world, U.S. industrial property owners are benefiting, seeing strong demand for space from end-users and record rent growth. The trend is particularly strong in markets surrounding key ports, but it now encompasses most of the country’s industrial real estate stock.

Supply chain issues

A few trends have combined to create the current supply chain challenges. As the U.S. economy recovers and retailers start replenishing diminished inventories, American ports are experiencing a surge in imports, according to real estate services firm CBRE. However, the country’s major ports, including the ports of New York/New Jersey, Los Angeles and Long Beach—are experiencing delays in both ship arrivals and waiting times to unload.

The congestion at the ports of Los Angeles and Long Beach is being compounded by limited hours of operation, a severe shortage of truck drivers to move goods from the ports to warehouses and low industrial vacancy, according to Mike McCrary, executive managing director for industrial services with real estate services firm JLL. “Simply put, there is nowhere to put the merchandise, and until solutions are found to these issues, the ports of Los Angeles and Long Beach will continue to be congested and the supply chain disrupted,” he says. McCrary also notes that delays in unloading containers are slowing exports due to a lack of empty containers to fill.

The current logistical disruptions are adding to a long list of issues dating from before the pandemic, says James Breeze, global head of industrial and logistics research with CBRE. When the pandemic arrived, industrial occupiers began shifting to the just-in-case (JIT) method of distribution in an attempt to avoid lack of inventory to meet orders. “The keyword here is ‘attempt,’ because it is so difficult to get to inventories they are comfortable with, due to strong demand and lower supply,” Breeze says. As a result, these occupiers are now leasing additional space or outsourcing some or all of their distribution with the goal of stockpiling sufficient inventory.

Today, manufacturers are compensating for the shortcomings of JIT production networks and supply chain disruptions such as the closure of the Suez Canal for six days by also increasing the demand for warehouse space to store “safety stock,” CBRE research shows.

Impact on property fundamentals

These trends, along with the strong growth in e-commerce sales, are leading to record leasing volumes and rental rate growth, Breeze notes. At the end of August, industrial lease transactions, including both new leases and renewals, totaled 659 million sq. ft. year-to-date—an all-time record for the market at this point in the year and a 48 percent increase from the same period in 2020.

In turn, strong demand and low vacancy rates have pushed rental rate growth to record high. At mid-year, asking rents were up 9.8 percent overall compared with the same period a year ago, according to Breeze. In some markets, including the Inland Empire, Northern New Jersey, Central New Jersey, Philadelphia and Nashville, Tenn., rents rose by more than 20 percent year-over-year.

According to a mid-year CBRE market flash on industrial rents, Inland Empire and Northern New Jersey markets, for example, have some of the lowest industrial vacancy rates in the nation, at 1.2 percent and 2.2 percent respectively, because they are located in coastal areas near large population centers. As a result, effective rents in these markets rose by 24.1 percent and 33.3 percent year-over-year, respectively, during the first half of 2021.

Low vacancy and rising rents in markets near major ports are also putting upward pressure on rents in inland areas, as tenants seek space to store the influx of incoming products. Many companies prefer to store additional inventory near ports of entry, but with just 75 million sq. ft. of new industrial space under construction at the end of 2020 and more than a third of it already pre-leased, seaport markets are experiencing the lowest vacancy rates and the highest rent growth on record.

Occupiers may initially suffer “sticker shock” from the exorbitantly high rents in these market, but can overcome it quickly by mitigating escalating transportation costs, which now represent a much higher portion of overall supply-chain costs than rental rates, reports CBRE. Many occupiers, in fact, are finding it cost-effective to lease more space to cut down on transportation costs because although rents are at record highs they can pale in comparison with the increase in transportation costs.

According to CBRE, transportation costs typically account for half of an occupier’s total logistics costs. However, that figure can easily rise to 70 percent, while fixed facility costs, which include real estate rent, accounts for only 3 to 6 percent. “It takes roughly an 8 percent increase in fixed facility costs to equal the impact of just a 1 percent increase in transportation costs,” says Joe Dunlap, managing director of supply chain advisory with CBRE.

Overall, supply chain volatility further heightens the need for additional warehouse space to stockpile goods and mitigate future disruptions, according to CBRE Econometric Advisors. The increased squeeze imports are putting on existing warehouse space is driving the trend toward a shorter, more resilient supply chain, the firm’s researchers note. This might include adding new points of manufacturing, reshoring or nearshoring in Mexico, according to Breeze.

“Escalating rents are direct factor in the supply-and-demand curve—there are not enough industrial buildings to accommodate user demand, which effects the greater supply chain,” says McCrary, noting that supply-chain disruptions will create a continued focus on developing more industrial facilities in core-hub port markets.

McCrary also expects to see a focus on technology to drive efficiencies. “We will see pressure on improving the ‘digital’ local infrastructure supporting supply chains, such as automation at the ports and technology that marries truck drivers with containers.”

Source: “Supply Chain Issues Pushing Industrial Rents to Records“

Reinvention Ahead

“Ghost towns.” That is how Bloomberg reporters recently described London, New York, and San Francisco, all of which experienced significant decreases in workplace activity during the pandemic. Such a bleak scenario seems a logical outgrowth of a trend researchers at the Brookings Institution observed in the spring. They noted that “the pandemic pivot to telework has flatlined downtown activity and raised existential questions about its future.”

Nevertheless, there is hope for downtowns hit hard by the pandemic. Many experts believe that recovery won’t be simple or quick, but that it is entirely feasible.

IDEAL DOWNTOWNS

The ultimate goal of recovery efforts is to create environments where people live, work, and play. In the view of Eric Northbrook, SIOR, executive managing director and partner at Voit Real Estate Services in San Diego, ideal downtowns operate 24/7. For city planner Karin Brandt, founder and CEO of the technology firm coUrbanize, they are walkable and accessible places where people can accomplish most of their tasks and activities. Frank Martin, SIOR, senior associate broker at Hall Associates Inc. in Roanoke, Va., emphasizes the need for vibrant retail and restaurant communities. He also believes that ideal downtowns house large populations of residents.

EFFECTS OF THE PANDEMIC

Downtowns that met or were close to meeting these criteria encountered major obstacles when the pandemic erupted, bringing with it an exponential rise in remote work. Remote work, in turn, prompted many residents to move from high-density areas—at least temporarily—and many companies to rethink their space needs and locations.

“Many metro areas are only starting to grapple with the pandemic’s aftereffects,” says Theresa Agovino, the workplace editor at the Society for Human Resource Management. In an article entitled “Pandemic Dims Big Cities’ Bright Lights,” she characterizes the exodus of companies and individuals from urban centers as “bad news for big-city economies,” explaining: “Fewer patrons for restaurants, bars, stores and services means fewer establishments can survive and fewer workers will be needed. It also means less sales tax is collected. Meanwhile, declining rents stifle building values, which, in turn, squeeze property taxes, which are based on appraisals.”

Brian Zrimsek, industry principal at the proptech firm MRI Software, believes that cities largely dependent upon public transport were affected to a greater extent than others. The “ghost towns” of New York, London, and San Francisco serve as cases in point. All three are reliant upon public transport, and all three, according to the Bloomberg article, are experiencing workplace activity about 50% below their usual levels.

Meanwhile, the appeal of smaller cities and suburbs, where cars replace subways and density is lower, has risen significantly. “Main Streets gained prominence during COVID,” says Brandt. “People want to stay closer to home and they’re shopping locally.” Accordingly, she expects to see a development boom in these areas along with an influx of co-working facilities.

In an essay in The Wall Street Journal, Richard Florida and Adam Ozimek elaborate on the trend of “Zoom towns” competing with “superstar cities” like New York and San Francisco. They suggest that “Over time, the competition for talent could shift to places that offer the best combination of quality of life, affordability and state-of-the-art ecosystems to support remote work.”

But don’t write off big-city downtowns yet. Some are already recovering. Some are reinventing themselves. Indeed, it is possible that some will end up stronger than they were before the pandemic.

STEPS TOWARD RECOVERY

Remote work may be here to stay, but it’s not for everyone. Many employers—and even employees—see the benefits of working on-site, at least part of the time. Employers want people under one roof so that they can pass on institutional knowledge and company culture, and provide mentorship, says Martin, who remarks, “That’s not achievable via Zoom.”

He adds that employees who benefit from brainstorming, efficiencies, talking to people around the water cooler, and those who want to grow their position within a company will want to go into the office. That bodes well for central business districts.

Landlords can encourage returns of office tenants by demonstrating flexibility. For example, Northbrook reports that in San Diego, landlords are agreeing to shorter-term deals, and are happy to do so.

Creativity has fueled recovery on the retail front. Brandt offers the examples of restaurants and stores extending into the streets, retailers adopting curbside pickup, and malls that are incorporating more open space outdoors and setting aside space for programming and outdoor games.

Zrimsek believes that “experiential retail” is the key to success, especially with goods that are less commoditized. As he points out, “It is unlikely that someone’s going to buy a bridal dress online.”

Retail is not the only sector that is getting creative. Many landlords and municipalities are exploring the adaptive reuse of buildings to attract companies, workers, and residents alike. One way in which San Diego is weathering the pandemic storm is by supporting development of life science facilities, many of which are housed in former industrial spaces, says Northbrook. Today, he calls the city a “life science mecca,” and notes that rent is rarely a top concern for life science companies, which typically have research and development budgets that make rent expenses pale in comparison.

Some owners and developers are converting downtown hotels into much-needed affordable housing, and retail spaces into micro-fulfillment centers. Opinions are mixed on the appropriateness of the latter. Brandt, for one, finds the high density and narrow streets of cities like New York and Boston an opportunity to rethink last-mile delivery approaches. She recommends sustainable options that offer alternatives to large delivery trucks, which can cause traffic jams and obstruct the pedestrian experience.

It’s too early to determine which methods of reinvention and repurposing will have the most impact, but they all have great potential to boost the recovery of downtowns. Another boost is on its way from people tired of pandemic-related restrictions. “Everyone’s pent up,” says Zrimsek. “It’s like we’re coming out of Prohibition. We’re going to flock to sporting events, theater, restaurants, and bars. The Roaring Twenties are about to pop.”

Source: “Raising Downtowns Up“

Delta Variant Brings a Cloud to Brightening Skies

Is that a light at the end of the tunnel that CRE practitioners see, or is it the Delta variant “train” heading towards them? The truth is it may be too soon to tell, but for the first time in over a year, markets have been recovering from the impact of the pandemic.

“The overall office market conditions continue to heat up in my market (Raleigh/Durham, N.C.), with life sciences being the most active thanks to Research Triangle Park,” says Street Jones, SIOR, principal, vice president, RCR | Rich Commercial Realty. He adds that 95% of his clients are back in the office, and the remaining that are not have established a timeline to return, “though the news about the rising Delta variant and speculation for the fall has extended some of those timelines.”

“For us, it was the quarter of opening back up,” says Grant Pruitt, SIOR, president and managing director, Whitebox Real Estate, Dallas, while cautioning that “So much with COVID is geographical and regional.” For example, he notes, a mask mandate was implemented in Dallas County at 11:59 PM on Wednesday, August 11. “By Sunday evening, the Texas Supreme Court struck it down; the masks and temperature checks were implemented for two business days and then went away Monday or Tuesday of this week,” he reports.

Pruitt, whose company experiences real estate both as a tenant and a representative, sees clear improvement from both perspectives. “The second quarter, as far as being a tenant, has been transitional,” he says. “We saw temperature check stations go away, gathering restrictions go away, the mask mandate went away – we really began to experience a return to normal in every sense of the word.”

As a tenant with a client base, he continues, COVID made it very difficult to service clients. “Now, it’s different,” he asserts. “We’ve hit 12-month lows in deaths and cases, which gives the assurance to businesses they’ll be able to plan for moving forward. We went from really being locked down to being really open.”

“Things have continued to improve over last year,” notes Graig Griffin, SIOR, managing partner, Windermere Commercial Real Estate, Salt Lake City. On the industrial side, he says, demand “never really waned,” except for a two-month period in the middle of the “void.”

While there was more uncertainty in the office market, he says that has also begun to change. “There’s a great divergence from last quarter to this quarter as it relates to demand,” he says. While there are still a number of variables, “now, there are a lot of answers,” says Griffin. “There’s more surety as to what the workplace can look like and should look like; the vaccine has made an enormous difference.”

“From the perspective of industrial, we’re still going forward at an incredible clip; leases are up, sales are up,” adds David Liebman, SIOR, designated managing broker, Merit Partners, LLC, Northbrook, Ill. “The pandemic has even helped the industrial sector—probably more than any others, with the possible exception of multi-family. The Amazons in the world and the companies that service them were and are going to need warehouse space. Unfortunately, product is getting lower, and that’s the biggest challenge.”

The end result, he says, is “a fair amount of equilibrium” in the industrial market. “Developers are not doing the stupid things they did in 2007-8 when they overbuilt,” says Liebman. “The end result was that literally for three years after that, for the first time in my career I had not seen one square foot of spec warehouse space happen anywhere in metro Chicago.”

Today, he says, “In certain submarkets we have more demand than product, and in a very few, it’s vice-versa.”

TAKING A CLOSER LOOK

While the overall theme is positive, a closer look at property types and submarkets shows that things can vary significantly. For example, in Raleigh/Durham, Jones says that conversations around flexible work from home models are “ongoing,” and that the long-term impacts to the office market are yet to be known. “The downtown Raleigh submarket seems to be the submarket that continues to be the most negatively impacted in the area,” he says. “Prior to the pandemic, rising rental rates coupled with high parking costs had a lot of users considering suburban environments who had never considered moving out of downtown before. Between the pandemic and the civil unrest last year, many tenants have indicated that they would be moving out of downtown at lease expiration. On the flip side, downtown Durham is thriving as it did not have the same level of civil unrest as the Capital City, and also landed Google amidst the pandemic.”

The biggest news in Dallas, says Pruitt, seems to have been office sublease vacancies in the past 12 months. “They peaked since the start of the pandemic somewhere around 9 million square feet in this market (we are roughly 400 million square feet as a market),” he shares. “There is currently roughly 8.5 million square feet of office sublease space on the market—1.1 million is in Fort Worth, Texas,  (oil and gas collapse), 500,000 was Class C or mis-classified product (really retail or industrial, etc.), and 900,000 had less than 12 months of term left.”

That leaves 6 million square feet, he notes. Of that, two-thirds of the spaces are less than 15,000 square feet. The other one-third is comprised of 10 blocks of space. “When you break it down, the sublease market is not what the news has hyped it up to be,” says Pruitt.

“According to Kastle Systems, the occupancy is finally starting to rise,” he continues. “It plummeted to the low of about 20% in April of last year.” It was pretty flat between 30%-40% occupancy at the start of April of this year (aside from a massive drop in March of this year), he adds, but over the last quarter there started to be an uptick:

• April 2020 – Roughly 20% occupancy
• April 2021 – 30-40% occupancy
• June 2020 – 30-40% occupancy
• June 2021 – 40-50% occupancy

“We’ve seen a steady increase in rents over the last couple years through COVID; we sort of expected them to level off, but they really didn’t,” says Griffin. Inventory is low, he adds. There’s a lot of money, and more than 50% of all transactions are in cash—which, he says, is unusual for this segment.

“The cost of land has continued to rise without exception, and with the cost of construction commodities, it makes sense to raise prices,” Griffin adds. This started, he says, based on the supply chain, but it has worked its way through business. “I’ve seen people take extra profit because they can—even if their costs are not up,” he shares.

ADJUSTMENTS, ANTICIPATION

SIORS, like everyone else, have had to make adjustments during COVID. Some of these may continue for a while, but others, due to the recent improvement and anticipated brighter future, may see a “return to normal.”

“We went from virtual standstill to getting off high center,” says Pruitt. “We’re beginning to implement plans for people to feel safer, so they can go back to the office and be comfortable in those environments.”

Although technology has certainly enabled business communications to continue during the pandemic, he says “it still makes it difficult to engage in business efficiently and effectively.” In short, he says, “we’re going back to what we were.”

“Industrial looks fine; we have no reason to believe things will slow down,” says Liebman. “We’re working on a couple of investment sales deals that really could go for numbers much above what I estimated they would be.”

However, he adds, there are some yield issues coming up with respect to investors. “Construction pricing really knocked industry and other sectors for a loop,” he says. “Last December a client started work on a 287,000 square foot spec warehouse and ordered materials at $848,000 for structural steel. Now in the spring, they wanted another 280,000 square foot building and they started to order steel; for basically the same building it was $2.4 million. That’s 50 basis points of their yield on that property. This will force a lot of developers/owners to try to recalculate what their yields and returns will be on these properties.”

Jones also foresees a challenge as prices have risen. “Like everywhere, the construction climate is hindering transactions and forcing more tenants to renew, even though rental rates remain unchanged,” he observes. “Tenants looking to relocate and shrink their footprint are finding that, due to the high costs of upfitting a space, the economics of renewing make the most sense—sometimes it’s even more expensive to downsize.”

A relocation, he continues, would likely require a tenant to come out of pocket for an upfit, sign a longer-term deal, and have the disruption and costs of the actual relocation.

“For these reasons, we have a lot of tenants exploring relocating, but ultimately staying put,” says Jones. He adds that new lease transactions and development activity for the remainder of 2021 will depend on both the impacts of the rising cases of the Delta variant and on construction pricing trends. “Hopefully, both of those begin to trend downward, or level off (at a minimum),” he says.

“We’ve had to go ‘old school’ to procure property, getting in front of people what the market looks like, where financing is at,” says Griffin. “In some ways that’s good. It puts us in an advisory capacity more than a brokerage capacity—which I actually like better.”

For Griffin, the rest of the year looks good. “For our company, and my team, this will be a record year for us; last year was, too, but we’ve already exceeded that. Interest rates are low, so many companies are finally plunking down cash, fearing they’d be paying more in the future.”

Still, he says, success will come down to how the individual real estate professionals serve their clients. “For myself and other brokers who do what I do, relationships will be more important than ever,” he concludes.

Source: “A Questionable State of the Industry“

As the Nation Awaits Repairs to Infrastructure, Industrial Specialists Are Adapting

At the time of this writing, the U.S. stands to lose its global competitive edge if Congress fails to take action on a pair substantial infrastructure bills, but astute industrial specialists are still finding opportunities in an evolving market.

Back in the 1970s, Fram Oil Filters began a long-running television ad campaign featuring an auto mechanic imploring customers to get regular oil changes—which included their oil filter—to prevent catastrophic engine failure. The tagline was essentially this, “You can pay me a little now, or you can pay me a lot later.” The slogan often surfaces when business cases for preventive maintenance are made for everything from property management to healthcare, but it may be time to revive it once again as the country tries to move forward on two massive and long-overdue infrastructure bills.

A pair of reports issued earlier this year by the American Society of Civil Engineers (ASCE) analyzed the current state and potential future of America’s infrastructure, and the results aren’t pretty. The first report, Failure to Act: Economic Impacts of Status Quo Investment Across Infrastructure Systems, forecasts that the U.S. economy will lose more than $10.3 trillion in U.S. Gross Domestic Product (GDP) by 2039 if investment levels remain the same. Losses would include $2.4 trillion in exports, $1.8 trillion in imports into the U.S. economy (resulting in a $4 trillion loss of trade), and a loss of more than three million jobs. On a consumer level, inaction would drain more than $3,300 from a family’s annual disposable income each year from 2020 to 2039.

“First of all, there had better be a bill (passed),” said Maria Lehman, incoming president of the ASCE for the 2022-2023 term. “The needs for rebuilding our infrastructure are $5.9 trillion, and we’re spending just shy of $3.3 trillion, so not doing something is not the answer because it just keeps getting worse and worse.”

A second study, the quadrennial Report Card for America’s Infrastructure released earlier this year, paints an equally troubling picture, even though the grade for the overall infrastructure actually improved from a D+ in 2017, to C-. America’s roads received a D grade, with 43% considered in poor or mediocre condition, costing motorists over $1,000 each year in wasted time and fuel. Bridges fared better with a C grade, but 42% of all bridges are at least 50 years old, with a repair price tag of $125 billion. On a brighter note, rail (B) and the ports (B-), two vital links in the supply chain, received respectable grades, in part because freight rail is almost entirely privately funded, and many ports are privately owned and operated (with others managed by a government or a quasi-government authority.) The report also emphasizes that although there are 17 categories being assessed individually, infrastructure as a whole is now more connected than ever before.

“I think one of the things we learned during the pandemic is that infrastructure is a system of systems, and it’s the weakest link that breaks everything down,” said Lehman. To illustrate, she points to the toilet paper shortage during the pandemic. While acknowledging that some demand was accelerated by hoarding, both the source material (trees) and the production plants were well distributed across the country, yet the supply chain failed. “[The product] was non-high tech and we still couldn’t figure it out for nine months. And now we can’t get microchips to build and sell cars, and that’s 100 times more complicated. So we have to get smarter about being resilient in supply chain logistics, because we can’t build a healthy economy on a crumbling infrastructure.”

If the U.S. wants to build a future-ready infrastructure system, the report recommends an increase in investment from all levels of government and the private sector from 2.5% to 3.5% of GDP by 2025. In comparison to the rest of the developed world, that’s a drop in the bucket, as most are spending seven, eight and nine percent of their GDP according to Lehman, and China is spending 12%. She adds that infrastructure investment is eminently doable. “But you have to have a national imperative. You have to have senior leadership saying ‘This is important. We have to do this.’ We have so many issues and so much investment that needs to be made that we have to unleash everything that we have. And if we do that over a decade, then we can go back to being leaders in the world.”

THE IMPACT ON CRE

So what does all this mean for commercial real estate industrial specialists, especially when considering the ever-increasing impact of e-commerce on logistics? In his recent report, Last-Mile Logistics: Commercial Real Estate’s Growth Engine, KC Conway, chief economist for CCIM Institute, highlights that the last mile is dependent on multiple components of infrastructure, including ports, inland waterways, rail, highways, bridges, energy, aviation, and even levees and storm-water management, and that all must work in synchronization for the last mile of delivery to function at peak efficiency and capacity.

“For real estate professionals that are in the industrial space, if they don’t understand that new connectivity, then they don’t understand where logistics infrastructure is going,” says Conway. And while the ASCE reports expose some harsh realities about the overall state of America’s infrastructure, he is encouraged that the infrastructure most vital to industrial real estate going forward—rail and ports—is also the best maintained. “Everybody wants to move it into the port, put it onto the rail, and get it inland as close to the population as possible, then just truck it for a short distance. And where that is going to be most feasible is where the railroads are connecting to the ports.”

Conway says that that interconnectivity is now having a huge impact on site selection, not only for fulfillment centers for e-commerce giants like Amazon, Walmart, and Home Depot, but also for other large-scale users like auto assembly plants and manufacturers. “Those companies are quickly figuring out where to best deploy capital, and they’re going to locate those physical capital assets where there’s going to be good logistics infrastructure that is up-to-date, being modernized, and not in disrepair.”

One geographic region that Conway expects to benefit from the port-rail connection is something he has dubbed the “Golden Triangle,” a massive swath that extends from the top of the Great Lakes and southwest to Texas and the Gulf Coast forming one side of the triangle, and southeast through Tennessee, Alabama, Georgia, the Carolinas, and Florida, forming the other side. This region is home to 70% of the American population, encompasses five of the seven Class I railroads operating in the U.S., and has more ports than any of the other regions of the U.S. Since the opening of the expanded locks in the Panama Canal in 2015, the number of shipping containers handled by East and Gulf Coast ports has increased dramatically. Conway also notes in his report that the Golden Triangle “now surpasses the West Coast market in virtually every industrial CRE metric, including new construction, transaction activity, and pricing.”

In addition to the ports and rail, the inland waterways could become an increasingly important component of the logistics infrastructure, particularly within the Golden Triangle. One barge tow (15 barges) can transport the equivalent of 216 rail cars or 1,050 tractor trailers, and barge is a “green” alternative to moving product by truck. Unfortunately, the ASCE gives the inland waterways a D+ in its report card, though the Biden administration has called for significant investment in waterways.

“There are two major issues as far as infrastructure on the logistics side is concerned,” says Bryce Custer, SIOR, a broker at NAI Spring Commercial Real Estate in Canton, Ohio and an evangelist for waterways logistics. “One is that a lot of the locks and dams are functionally obsolete, and whenever there’s a shutdown—as we saw in the Suez Canal—on the Mississippi or the Ohio Rivers or any of the major waterways, it slows down product, and at great cost. We’re not investing enough in our locks and dams, but the other issue is the lack of an ongoing dredging program to keep these industrial ports clear for traffic.”

Custer, whose industrial focus has been on development along the Ohio River (Ohio, Kentucky, West Virginia, and Pennsylvania), feels that investment in the waterways could spur significant industrial redevelopment in those states, particularly the repurposing of coal plants that have been demolished. “It’s a great opportunity on the industrial logistics side, because you already have existing infrastructure,” says Custer. “You typically have highway access, you have rail, and many of these sites have barge docks already, so it’s an ideal area for companies to locate.”

But as is with all sectors of the deteriorating infrastructure, it will ultimately come down to funding, which at the time of this writing was still very much up in the air. “We know as a country that our infrastructure needs help and there’s no-one that’s going to question that. Instead, they’re going to question who’s going to pay for it,” says Lehman. “And that’s a step in the right direction. Now don’t kick the can down the road again—do something.”

Source: “The System of Systems“