Global Strategies for Local Markets
Shifting global labor and consumer landscapes are driving change across commercial real estate sectors, including warehouse and distribution, manufacturing and retail.
Rising wages in Asia, transportation costs and advanced automation are just some of the factors that have manufacturers rethinking their business models.
Location changes are occurring. Some companies are moving all or parts of their operations back to North America or locating in Eastern Europe or emerging new markets.
Meanwhile, as middle class growth explodes in Asia, global retail chains are sourcing opportunities to enter regional markets. E-commerce is also pressuring retailers to update their strategies – and the rise of urbanization is seeing an increase in smaller, more focused store formats. Sophisticated delivery systems including high-tech distribution centers in local and regional markets are key elements of the new picture.
It's all part of the Changing World of Trade.
Trends & Forecasts
Toronto, Vancouver, Chicago, Miami, Berlin, Moscow, Upper Silesia, Shanghai and Hong Kong are on the watch list as active industrial real estate markets.
One of the biggest challenges facing industrial space users across the Americas is the shortage of quality space, as technological advances have rendered many facilities obsolete.
Cross Border Fire
With U.S. and European brands expanding their presence in growth countries like China and Brazil and cross-border retail on fire around the world, there is a greater urgency to accommodate changing distribution networks.
In 2005, U.S. manufacturing wages were almost 25 times that of China. Today, that wage gap multiplier is under 10 and could be under five by 2015. Mexico's cost of labor is beginning to mirror China's. Reshoring is likely to gain traction as the "total landed cost gap" of offshore manufacturing narrows, and labor costs become more globally balanced.
Despite continued global economic challenges and the related manufacturing slowdown in China and other major Asian economies, industrial, warehousing and logistics market activity has remained steady and is gaining momentum.
Markets around the world are positioning themselves to capitalize on trade by investing heavily in infrastructure improvements to ports, airports, highways, railways, industrial parks and intermodal hubs. Intermodal facilities and inland ports are becoming a critical part of supply chain dynamics.
The "click-and-collect" option, where customers can order on the internet and collect their purchases from designated locations such as an existing store, is a growing trend in Europe, notably France and the UK.
3-D Printing Game Changer
Thanks to the web–which has enabled a digital, community approach to innovation and sourcing–and the availability of desktop-manufacturing technology such as 3-D printing, regular people will be able to do what only factories could do before. Some say this will this kick off a new era in manufacturing, one where success is more dependent on innovation and entrepreneurship than on cheaper labor, energy or real estate.
Multiple, well-placed distribution centers minimize the time and distance spent on the final leg of delivery. Many retailers are setting up dual operations backed by mega-distribution facilities that support both online and in-store inventory. Locations must be close to affordable labor and have access to rail, highways and air transportation.
As production and manufacturing become more local to meet delivery timelines, the average distance that transported goods move will continue to shorten. In the Americas, transportation is becoming horizontal and holistic, moving end-to-end freight through increasingly seamless intermodal connections.
In Europe, financial investment is focused on upgrading the unevenly developed infrastructures of Central and Eastern Europe to keep pace with state-of-the-art advancements common in Western Europe.
Massive infrastructure investment is underway throughout Asia as rapid urbanization in most Asian economies is driving up the volume of freight and passenger transport across regional railways, expressways, distribution centers, ports and regional hubs.
John Lewis Partnership
Services Used: Leasing
Supply Chain Acquisition
John Lewis was in an existing 650,000-square-foot unit on G Park, Milton Keynes. Cushman & Wakefield was appointed to negotiate the acquisition of an additional 670,000 square feet that had to be no more than 100 meters (about 1,076 feet) away from the first unit as they needed to be joined by a conveyor belt link that will be constructed 8 meters (about 86 feet) above the combined yard areas.
The acquisition is a key part of Programme Q, the Partnership's biggest ever Supply Chain and Systems transformation project that involves significant redundancies and future property disposals. With planning consent secured, construction will commence on site in summer 2013, and practical completion of the base building is due September next year. A total of 450 new jobs will be created.
Online sales at John Lewis have passed the $1.5-billion mark on a rolling 52-week basis, alongside a successful launch of a new multi-million-pound web platform. The milestone comes a year ahead of the retailer's forecast, which had estimated reaching $1.5 billion of sales in 2014. This has led to the additional investment in their E-Commerce Fulfillment Platform, which runs exclusively from Milton Keynes.
Wincanton PLC / Poundland
Hoddesdon, Hertfordshire, UK
Services Used: Leasing
Disposal Leads to Acquisition Appointment
Acting for Wincanton plc, Cushman & Wakefield disposed of its 220,000-square-foot facility in Hoddesdon Hertfordshire without void to growing discount retailer Poundland. After establishing a relationship as a result of the deal, we were appointed to advise on the retailer’s longer-term acquisition project, a forward-funded 350,000-square-foot design and build project in Harlow. Once complete, the new site will create up to 650 jobs at the peak of its operation. The distribution center represents a $60-million investment for Poundland with the aim for it to be operational by 2014. The base build and fit-out contracts will be project-managed by Cushman & Wakefield as well.
Tevapharm India Pvt. Ltd.
Sanand, Gujarat, India
Services Used: Capital Markets
C&W Helps Major Pharma Secure Space
Headquartered in Israel, Teva Pharmaceutical Industries is a global leader in generic pharmaceuticals. Teva, in collaboration with Procter & Gamble, planned to set up a multi-product, state-of-the-art manufacturing facility in India to produce OTC drugs for domestic and APAC markets. Referred by our alliance partner Inter Israel Real Estate Consultants, Cushman & Wakefield was selected to assist the client for location strategy and land acquisition.
Our team conducted customized location advisory and financial assessment to identify potential locations for this large project. Leveraging our experience in the manufacturing sector, we undertook a detailed land search to fulfill the client’s comprehensive criteria. We helped them finalize Sanand, Gujarat, an excellent location with the best of infrastructure where a facility could be built in a short time. We were successful in helping the client take the first step towards establishing one of the largest OTC medicine manufacturing sites in the world, and continue to support their requirements in India.
Cosmos Machinery Enterprises Ltd.
Hong Kong and various locations in the PRC
Services Used: Valuation & Advisory
Portfolio Valuation Across China
Cosmos Machinery Enterprises Ltd.’s portfolio includes industrial, retail, residential and office assets in 10 different cities located across the People’s Republic of China (including Hong Kong), with some assets in tier II and III cities.
Hired to complete the valuation of these properties for accounting purposes, Cushman & Wakefield’s scope of work included undertaking inspections of the properties, researching proper and relevant market information that was critically analyzed, and completing an opinion of market value that detailed our investigations, analysis and findings.
One of the challenges the team faced was a lack of market evidences. This required a strong local market knowledge on different types of properties in various locations. With our in-depth knowledge, sound market experience, local networks and extensive database, our team was able to complete the assignment with compliments from the client.
Robert Bosch Mexico
Multiple locations in Mexico
Services Used: Corporate Occupier & Investor Services
Bosch Selects Cushman & Wakefield in Mexico
To help German manufacturer Robert Bosch achieve its goal to reduce regional operational costs and increase sales, Cushman & Wakefield was selected as a strategic partner to deliver Facilities Management Services for 13 manufacturing sites in Mexico.
"Mexico is considered by Robert Bosch as an important market in the region."
– STEFAN HARTUNG
Industry, Energy and Construction, Bosch
The challenges for this project included guaranteed savings of 5%, delivery in different geographical regions (northeast, northwest, and central Mexico), different asset classes (industrial plants, corporate offices and distribution centers) and meeting the needs of different industries (automotive, manufacturing, etc.).
In order to ensure consistency, Cushman & Wakefield appointed an account manager to centrally manage regional teams and implemented a hybrid model combining remote and on-site service. Through self-performing preventive maintenance and subcontracting corrective maintenance with strategic third- party providers, low costs were achieved and savings were delivered.
If global trade grows as expected by 9.5% per year for the next 10 years, about $2.7 trillion in new goods will be added per year to the global pipeline.
By 2021, an astounding $45 trillion in goods could be crisscrossing our planet every year. That compares to $6.5 trillion in 2001.
Winning Industrial Real Estate Strategies
Companies in sectors with high-customer service demands are expanding their number of regional distribution centers and cross-dock facilities to reduce the overall distances to customer destinations. These facilities will be increasingly urban in order to satisfy the growing trend towards same-day fulfillment, bolstering demand around the edge of major cities for smaller, in-fill spaces located closer to consumers.
With the growth in internet access, technological advances will increasingly drive business change. Leading logistics companies will embrace technology and develop new ways of using property.
Large occupiers are consolidating space and finding efficiencies both within their four walls and through collaboration where complementary supply chains exist. Increasingly, we will see retailers, producers, shippers and logistics companies trying to extend their reach, extend their span of control and vertically integrate. Vertical integration promotes technology and process adjacency; more work will be done closer together. This is expected to drive greater demand for space.