Dive Brief:

• As companies reevaluate their supply chains and turn to China+1 strategies — with sourcing in Europe and parts of Asia that can access the U.S. fastest through the Suez Canal — the American Southeast and Gulf Coast are expected to benefit from increased import volume, according to a new report from CBRE, "The Changing Flow of International Trade."
• "While we will not see a widespread exodus from China, we will see a shift in trade patterns that will trigger broader effects on U.S. supply chains, including increased industrial distribution development and increased domestic manufacturing," John Morris, the executive managing director for Americas industrial and logistics for CBRE, said in a statement.
• The Southeast closed the first quarter of 2020 with the top three fastest-growing industrial real estate markets: Savannah, Georgia; Greenville, South Carolina; and Charleston, South Carolina. CBRE measures growth as net absorption as a percentage of overall inventory.

Dive Insight:

The report makes it clear that operations in the Eastern U.S. will still be smaller than the West Coast behemoths, and China will likely remain among the country's largest trading partners. But some factors will benefit the Southeast and lead to it grow at a faster rate, according to CBRE.

One is that the countries companies are turning to as alternative trading partners have an easier time shipping to the East Coast than the West Coast, because they can access the U.S. fastest through the Suez Canal.

Secondly, the Southeast is also a major population hub. The region has the three fastest-growing industrial real estate markets as "a direct result of increased demand for products in the Southeast — the largest populated region of the country at 85.5 million ... with projected population growth of 4.8% over the next five years," according to the report.

"As trade patterns change, this region offers significant logistics capacity, available land for industrial and manufacturing development, lower asking rents, and access to the largest population concentration in the country," James Breeze, the global head of industrial and logistics research for CBRE, said in a statement.

This would be the continuation of an ongoing trend for East Coast ports, which showed volume growth in 2019 as the ports of Long Beach and Los Angeles, and the Northwest Seaport Alliance, saw year-over-year declines. The Southeast also has access to major inland airports in Atlanta, Greenville and Memphis, as well as FedEx and UPS air hubs, CBRE said.

CBRE called Vietnam an emerging manufacturing hub. It said the average asking rent for industrial space has increased as much as 10% in the county, suggesting it could benefit from the ongoing revision of global supply chains.

The demand for warehousing space is expected to increase as economies around the world reopen and companies reassess supply chain strategies to add resilience by keeping more inventory on hand. CBRE suggested companies will keep months of inventory, rather than weeks' worth, close to population centers. But it notes that it's not clear how long this trend will last due to pressure to keep costs low for consumers.