JIT (just-in-time) concept has taken a beating.
Need to hold bigger inventories - easily accessible and close to population centres - of critical supplies: medical, staple products (rice, toilet paper, etc.)
Self-reliance is key: need to rebuild supply chains with the assumption that borders can be closed any time or won’t reopen in time.
Australia made a 5-year leap in online shopping penetration in less than 6 months.
Traditional logistics supporting manufacturing and exports will be down in 2020 by 13-32% [WTO estimates].
“China Plus One” strategy – supplement Chinese production with other Asian countries (Vietnam, Indonesia).
Logistics to the Rescue
Logistics + warehousing are in the spotlight for the infrastructure of cities.
The demand for warehousing has become long-term vs short-term just a year ago.
Resilience of supply chains will require 5-10% increase in inventories need better inventory management systems.
A push towards more manufacturing locations [MK: smaller ones?], including on-shoring and near-shoring.
Demand for distribution centres and industrial properties was high before the crisis, it’s even higher now thanks to e-commerce.
E-commerce is here to stay (ratchet effect). Buffer stock for traditionally lean consumer companies will grow.
The logistics sector is growing; the rest of the real estate market (retail and office) struggles.
Mar/Apr 2020: 40% of new leasing is for e-commerce warehousing. Will keep growing on the back of e-commerce adoption and higher inventory levels. [also food security and cold storage]
Capital inflow in the logistics industry is steady. [partially – out of the other sectors of real estate]
Pension and sovereign wealth funds have 20-25% of real estate allocation in retain, and only 5-10% in logistics/industrial [potential for growth].