The economy, both at home and abroad, is a complex and fragile system. Changes that may seem small can lead to ripple effects that are felt everywhere — that’s the nature of having a world that’s more connected and interdependent than ever before.
With that in mind, we’re going to look at globalization through the lens of its influence on industrial real estate. There have been positives and negatives abound, but for the sake of readability, we’ll focus on five for now.
Increased demand for industrial space
Globalization has led to a sharp increase in international trade and the expansion of supply chains, resulting in higher demand for industrial space. As a result, the industrial real estate market has seen an increase in the construction of new warehouses and distribution centers to accommodate the growth of logistics and e-commerce — and this trend is only expected to continue for the foreseeable future.
Competition for prime locations
With the growth of international trade, there is increased competition for prime industrial real estate locations, particularly in major ports and transportation hubs. This can drive up land prices and make it more difficult for companies to secure desirable locations.
Changing tenant mix
Globalization has led to diversification of tenants in industrial real estate. While traditional tenants such as manufacturers and distributors remain, there has been an increase in e-commerce companies and other logistics providers that require different types of industrial space. More and more businesses that have operated out of traditional office spaces have been moving to flex spaces in particular — and thanks to the versatile nature of these buildings, just about any business can set up shop and thrive.
Impact on supply chain management
Supply chain management has been transformed due to globalization, with companies now relying on global sourcing, just-in-time inventory management, and other practices that require modern and efficient industrial facilities.
Impacts on trade policies
Globalization can be influenced by trade policies that may impact the demand for industrial real estate. For example, changes in trade tariffs, free trade agreements or trade wars may affect the flow of goods and the demand for industrial space in different regions.
Overall, globalization has led to an increased in demand for industrial space — but it has also created new challenges and complexities in the industrial real estate market. Industrial real estate developers and investors must continue to monitor global economic trends and adapt to changing market conditions to take advantage of new opportunities and mitigate potential risks.
What does this mean for flex space? I’ll take a deep dive into what I think globalization will mean for this asset class over at Flex Space Untapped. If you’re ready to learn everything there is to know about flex space — how to get started, build, scale, and pivot — join me and my team of experts and let’s get started.
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