Prologis White Paper: Supply Chain and Logistics Real Estate
For supply chains and logistics real estate, the only constant is change. In this first paper of a three-part series, our Prologis research team examines the latest consumer and supply chain trends driving logistics real estate. This segment explores current supply chain trends with an emphasis on changes to location preferences brought about by e-commerce. With the current trends outlined, two subsequent papers will explore future trends, including the sustainability of these changes and the new changes likely to be ushered in by advances in such fields as big data and robotics.
Specifically, in studying waves of change in supply chains, we identify four trends that are positively impacting logistics real estate:
- Customers are increasingly evaluating end-to-end total network costs, rather than individual procurement operations for transportation, real estate and labor—a best practice adopted by forward-thinking customers.
- Optimizing a supply chain often means securing infill logistics real estate for better service and lower total supply chain costs.
- The rise of e-commerce is pulling supply chains closer to consumers.
- Logistics real estate near consumers has higher barriers to supply, as well as deeper and more diversified demand.
Important factors for supply chains are globalization, data and automation, and transportation innovations. Supply chains became increasingly longer and more global. For real estate, this change prompted building requirements in key transportation nodes. Industry 4.0 includes the convergence of multiple technologies. The relevant ones currently being implemented for supply chains, including robotics, automation, and big data/predictive analytics, will drive the next evolution in supply chains. E-commerce—still an emerging trend—is creating new routes to consumers, thus driving demand for logistics real estate. Currently, e-commerce accounts for approximately 20 percent of new leasing, up from less than 5 percent earlier this decade.