Beyond this, we’re likely to see an increased need for space for reverse logistics—the business of effectively and efficiently handling e-commerce returns. Reshoring or near-shoring of U.S. manufacturing operations will create new distribution channels throughout the U.S. markets.
Finally, retailers and consumer products companies are investing hundreds of millions of dollars to upgrade their logistics facilities and supply chain networks across the country. The need to get more products to consumers in a 24- to 48-hour window is driving the need for larger, state-of-the-art facilities.
Crain’s: Do you anticipate any new outside influences that could change the way the commercial real estate industry must work this year?
Makris: Most markets that are seeing growth are also experiencing a shortage of skilled tradespeople needed to build projects. Our clients are seeing general labor shortages in many areas of the country as well. That is a concern, given that a large e-commerce facility may need to employ several thousand workers.
On top of this, commodity pricing increases, specifically for steel and concrete, as well as shipping delays, have created challenges for those in the industry. On our build-to-suit projects, we work closely with our clients to try to get ahead of steel orders—sometimes even before lease execution. This allows us to accommodate schedule changes related to the availability of materials.
Crain’s: How have tariffs affected commercial property owners in New York? How big a factor will they be this year, given that we have a new administration in the White House with its own positions on trade?
Makris: There are many things on the new administration’s agenda that could help our industry. We’ve been discussing a new infrastructure bill for several years now. This seems to be a priority for President Joe Biden’s administration. Improvements to and investments in our nation’s roads, highways, bridges, ports and airports would be very helpful to our industry.
Crain’s: Work stoppages have posed big challenges during inthe pandemic. Are you seeing any interesting coping strategies and workarounds emerging in commercial real estate, such as an increased use of automation?
Makris: Here at Duke Realty, we are vigilant about tracking automation advancements in logistics and looking for ways to support our clients’ needs. As customers face challenges in finding qualified workers to support their projects, we are seeing significant investment in robotics and automation to help fill this gap. I believe we will continue to see investment and progress in automation to help businesses grow despite a limited skilled labor market.
Crain’s: How can the commercial real estate industry best cope with trading route closures now that they have become an unfortunate fact of life?
Makris: It is important for companies to diversify their trade routes and ports of entry. Companies should have options in case trade routes are disrupted or ports experience backups. Additionally, companies learned a big lesson at the start of the pandemic as they quickly ran out of inventory. Now, companies are ensuring they have enough inventory to weather significant upticks in demand by having safety stock on hand. This requires companies to expand their storage footprint to accommodate the additional inventory. Also, companies should make sure they have enough raw materials on hand to continue manufacturing operations. In today’s environment, it is essential to find ways to operate without disruption.
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