In April 2020, at the start of the COVID-19 pandemic, logistics warehouse giant Prologis Inc. estimated U.S. inventories would increase by 5% to 10% in coming years as businesses built up buffer stock near their end markets to avoid potential supply chain disruptions.
Prologis' revised estimate may have been influenced by the extraordinary duration of the spike in U.S. consumer spending, which would have been hard to anticipate 18 months ago. In addition, the bicoastal supply chain bottlenecks could be a catalyst for U.S. importers to beef up domestic inventories to ensure goods are available and can be delivered soon after ordering.
J-I-T has dominated international transport and distribution for the past 40 years, and has generally worked effectively over that span. However, it has fallen out of favor since the pandemic disrupted intercontinental supply chains and caught importers with historically low inventory levels.
Prologis' goal to add warehouse capacity is compounded by the lack of space in high-density markets such as Atlanta, Chicago, Dallas, Southern California, and the New York/New Jersey metro region to build on. The company said last week when it released its third-quarter results that capacity in its markets, which include those so-called primary locations, is "effectively sold out."
Buyers of retail properties may want to convert the land to apartments and other residential uses because they can command better pricing per square foot. Retail-to-industrial conversions face zoning challenges, community opposition, and the difficulty of reconverting shopping malls and other structures to accommodate high freight throughput and the accompanying truck traffic.
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