a market inflection point

see remember folks we're going into this

time where we think it's potentially

true

that because of all these

shortages

that companies are over buying

okay when companies over buy they're

doing so because they're frustrated of

shortages so they're double and triple

ordering what they actually need to make

sure they have enough of a stockpile but

that means they have to stockpile it

somewhere and store it somewhere and

inventory it somewhere which actually

creates inefficiencies because anytime

you inventory stuff you lose stuff you

damage stuff stuff gets stolen it's a

disaster like get stuff off the shelf

having stuff on the shelf is is very

very very bad

in business this is why we like just in

time inventory but that whole concept

got screwed

during during these pandemic shortages

but anyway look at this financial times

u.s warehouses are running out of space

as containers pile high

let's take a look at this containers

this by the way could lead to

deflationary pressures right containers

piled high the port of new york and

jersey form attention-grabbing views

okay the facility is one of eight okay

whatever let's uh let's get here to the

point he has a team of employees and

real estate agents urgently searching

for more space rebounding consumer

demand has led to record imports through

us ports on both coasts and strained

every link in the supply chain after 41

years in the business this particular

person has a unique vantage point over

one of the worst of the bottlenecks that

executives and economists fear could

derail the u.s recovery demand for space

and demand for people have been the

greatest i have ever seen wow in 41

years all right

adding that he has been inundated with

calls for new customers but has had to

turn many of them down to prioritize

existing customers and this uh this

particular person again

is uh

a warehouse warehousing facility for

containers

imports at the port of new york and

jersey the third largest in the country

were 26.4 percent higher for the year

to august than in the same period in

2020 the warehouses where those

container loads would normally head

first before being distributed are

struggling to cope

nationwide industrial vacancy hit a

historic low of 3.6 percent in third

quarter you know i have to say i would

not have expected

uh

industrial vacancy to plummet if the

pandemic okay ism manufacturing by the

way uh just came in it looks like it

came in at 58.4

versus

59.2

oh yeah here we go it's on cnbc now as

well

the final read will end up 58.4

58.4 which happens to be the lightest

read of all of 2021 as a matter of fact

to find a line now this is interesting

the manufacturing index uh that

potentially implies a little i mean any

number over 50 is still growing like

expansion but as cnbc just mentioned one

of the lightest reads which

kind of potentially makes sense that you

would see some slowdown in the insane

ordering that we've been seeing for

factories and manufacturers because

of

of so much double and triple

pre-ordering that has been done and

that's why we're seeing these insane

amounts of storage and

storage issues these these uh shipping

constraints all of this take a look at

this somebody here christopher writes

warehouse problem is driven by the rise

of new 3pl like shipmonk ship fusion and

others

they're

grabbing all of the urban near urban

warehouses uh well thank you for that

thank you for that that insight so

anyway uh back into this here according

to uh cbre

uh let's see here okay that's the 3.6

industrial vacancy in the three markets

closest to the new jersey port combined

vacancy rates just are just 1.5 percent

the leap in demand has collided with a

sector that has not invested enough to

build capacity for months moments like

this

warehouse operators say they face

shortages of everything they need to run

their facilities efficiently now from

racks uh to balers to forklift trucks

this by the way sounds bullish for plug

plug power does uh hydrogen powered

forklifts by the way because this

equipment is caught in the same shipping

delays as other imports

as in many industries labor shortages

are also making the situation worse

according to bls the number of warehouse

workers increased by only three percent

in january and september a number

insufficient to match the surge of goods

flowing

in the past referrals from the employee

networks were enough to find new people

but not currently the effects are being

felt the shortage of space is pushing up

the prices tenants pay to store their

goods it used to be common for new new

warehouses to sit empty for months or

years before they found tenants but now

demand is so intense that customers are

booking space before

buildings are even completed

warehouse operators said on the latest

earnings call that a record 70 of the

space it is developing in the u.s has

been pre-leased

that is prologus pro logis

logistics logis pro logis whatever

anyway i imagine there are stocks and

standard earnings called people are in a

kind of panic mode when it comes to

buying or committing to real estate it's

incredible uh yeah here's the stock it's

ticker symbol p

l

d it's up 24 in the past six months

fifty percent year to date on the five

year chart it's up 192 percent my

goodness

uh some companies

with the resources to do so are buying

their own warehouses to ensure they're

not fighting rivals to secure the

capacity they need

according to co-star a real estate group

the top 25 retailers required almost 39

38 million of rentable square feet in

industrial space more than double the

2019 figure warehouse owners meanwhile

are accelerating construction plans to

catch up with demand

with so few options near ports some

retailers and logistics companies are

pushing further inland

redirecting some customers from los

angeles and long beach to utah and

nevada

where there are millions of square feet

of capacity well that makes sense but

problem is you just have to get it there

how are you going to get it there right

these facilities can be cheaper by a

margin of 20 to 35 percent but yeah

again you got to get it there uh

instead of spending 800 as a container

to get it from the port to a nearby

warehouse you might be spending like 3

500 to get it unloaded at a more distant

location

no kidding jeez what a mess this is a

problem that is going to be with us for

a while they don't expect this to end

until the middle or end of 2023 i

actually think it's going to get worse

yikes so it's interesting

i mean again so many warehousing issues

in my opinion are just the result

of massive

uh pre-ordering

double triple ordering by walmart

target by other companies to make sure

they have enough product

then they got to sort all the stuff that

they bought which that's going to take a

while they need labor to get out through

all this product that they just bought

and then they got to sell it

and once this all gets sorted i think

we're just going to be flooded with

product

store shelves are going to be going from

bare to overflowing

and it's going to force price cuts

so i do expect to see consumer based

price cuts

substantial consumer-based price cuts

next year

we'll see

we'll see individual

deflationary pressures not everything i

still think wages and rents are going to

have

substantial inflationary pressures but

this right here this article from the

financial times that is hands down

a deflationary concern you don't have

warehouse storage issues

uh and think inflation for very long in

my opinion

uh

take a look at this dk just spent ten

dollars

to say this

i work in sales for a large switch and

router manufacturer

starts with a c couldn't be cisco but

anyway you're absolutely right my

clients are

putting all their orders in place for

2021 now only exacerbating the issue

oh yeah yeah

well thank you so much for that insight