During my morning commute to work this past winter, I heard a story on news radio about a trial use of drones to deliver essential supplies to residents of a small island in Japan. I couldn’t find a written copy of the article at that time, but I stumbled upon the article yesterday. The small Japanese island that was the drone’s destination has a population of about 180 people, is located about 4 miles from the mainland, and relies on a ferry as its main means of transportation. The delivery of small, essential supplies such as prescription drugs, appealed to me as a practical use for drones. I can see drones as being used for this application in certain locations in the US as well. While reading this story, another practical use of drones for delivery came to my mind. How about delivery of supplies to construction sites? Not distant and remote sites, but examples such as bridge construction (think top of Golden Gate towers), high floors in skyscraper construction, and other locations that may not be distant, but are difficult to reach by traditional means. I like to hike in the New England mountains, and I know there are numerous occasions each year when hikers in need would benefit from a quick shipment of an essential item.
Now on to this week’s logistics news:
- Cass Freight Index: Shipments Jump 4.2% in April
- DOT Freight Transportation Index Rises to Second-Highest Level
- Alibaba Group Announces Strategic Investment in YTO Express
- Raising the Roof Making All the Difference in Warehouses
- Cross-Border, Institutional Capital Leads Charge to Scoop Up Logistics, Light-Industrial Portfolios
The Cass Freight Index for April shows a 4.2% month-to-month increase in shipments and a 1.6% increase for expenditures. However, both shipments and expenditures were down when compared to April of last year. Railroad and truck reported increased activity, and the strong dollar is likely contributing to increased imports while hampering exports. Taking a look at the attached photo of the index, you can see that it follows a seasonal pattern, with activity high during the mid-year, and lower during the colder months. Activity in 2015 appears to be following this historical seasonal pattern, although at a slightly lower level than that of 2014.
Looking back at March, the DOT Freight Transportation Index rose 3.1% percent over the same period last year and 1.7% sequentially to the second highest level on record. Although March came in strong, the first quarter of 2015 experience a paltry 0.2% growth rate – the second slowest quarterly growth in the last two years. So the index is essentially mirroring the economy with high historical output but low to moderate growth rates.
Alibaba continued its foray into the logistics industry this week with its agreement to take a minority stake in Shanghai YTO Express. YTO Express is already an established partner of Cainiao, Alibaba’s logistics affiliate. This investment appears as an additional step in Alibaba’s participation in the development of China’s, and Asia’s, logistics network. In May, Alibaba announced its intent to invest $249 million in Singapore Post to obtain logistics control, capacity, and efficiency.
The Warehouse property construction industry is benefiting from the e-commerce boom and builders are adapting their properties to meet the high demand for e-commerce fulfillment centers. Prologis is building a speculative property in Tracy, California with 40 foot high ceilings to accommodate three level mezzanines, as e-commerce retailers look to utilize multiple levels to accommodate their high SKU counts and drive additional efficiency into their fulfillment processes. By the way, this building is being built in a master planned park that is expected at full build out to include 19 million square feet.
CoStar, a commercial real-estate information services provider, highlighted the high investment demand for warehouse properties in today’s marketplace. Recent notable transactions include Blackstone’s sale of its $8.1 billion industrial real estate portfolio to Singapore’s sovereign wealth fund and Prologis/Norgis Bank’s $5.9 billion acquisition of KTR Capital. CoStar’s analysis of the market showed that warehouse and light industrial property sales increased 38% when compared to the same period last year. Foreign investors continue to invest in US properties for their steady returns, with rent growth and occupancy rates at highs. Clearly their is abundant capital to meet the investment needs of organizations looking to build out their fulfillment networks in the US, as well as abroad.
Have a great weekend!