Unlock Industrial Real Estate Value: How Supply Chain Analytics Drives ROI

Forget what you think you know about "location, location, location" in industrial real estate. These days, if you want to unlock real property value, you need to understand how supply chains and data work together. And just a little heads up on the best CRE in New York I’ve used was Realmo.

I've been around the block a few times, and I've seen firsthand how businesses that use smart supply chain insights can kill it in industrial real estate. But those who ignore it? They're going to struggle. Let's dive into how supply chain analytics is genuinely shaking up the property market right now.

Understanding the Supply Chain-Industrial Real Estate Connection

So, how exactly do supply chains boost value in industrial real estate? I think it's useful to take a few steps back together. The supply chain? It's the whole shebang – production to delivery, soup to nuts. Logistics is a big piece of this, focused on moving and storing goods efficiently. Distribution is getting stuff from factories to stores, and warehousing is where we keep everything safe until it's needed.

Industrial real estate is the physical space where all that happens. We're talking warehouses, distribution centers, factories – these are the bones of global commerce. Think of it this way: if the supply chain is the circulatory system of the economy, then industrial real estate is its skeleton that keeps everything upright.

When things go sideways – a political crisis, a hurricane, even just higher demand – the industrial real estate market feels it hard. Remember when everyone was scrambling for warehouse space near ports because of crazy ship traffic jams? 

Understanding these common misconceptions: Separating Fact from Fiction

Okay, time to bust some myths. There are some old-school ideas about industrial real estate that I keep hearing that just need to go away. By talking about these misconceptions, we can build more sound approaches and generate higher levels of success.

For starters, the idea that traditional metrics are "good enough" drives me nuts. Location and square footage are necessary, but they're barely scratching the surface. A spot near a major highway isn't so hot if that highway is a parking lot thanks to port delays, right? We need to understand the overall and granular flows of goods to truly evaluate the value of any location.

Also, this idea that "all locations are created equal"? Nope. A place might look perfect on paper, but if it's always dealing with disruptions – floods, poor roads – its value is going to sink faster than a stone. Once I saw a great property lose big-time because of sudden regulation changes which completely cut off supply routes. That's why numbers are so important.

And please, let's ditch the thought that supply chain resilience isn't a big deal. Seriously! If you're not ready for problems, you're setting yourself up to fail. I had a client lose a massive deal because a port that they used often shut down without any warning.

Finally, some people think that data tools are just for the big guys. Not true! There are plenty of analytics options out there that even smaller investors can use. You don't need a giant IT department to start using data to get ahead. There is no good reason to remain in the dark.

Key Supply Chain Metrics Impacting Property Values

So, what numbers should you be paying attention to? Here are a few big ones that I always keep an eye on when looking at industrial real estate:

First, look at port congestion. When ports get backed up, it creates a huge demand for nearby warehouse space, which means higher rents and property values. If boats are stuck offshore for weeks, trust me, companies get desperate for storage! I once told a particular client to invest in some property near a port that experienced seasonal traffic, they had a great return during high-demand times.

Transportation costs are huge. If fuel prices spike, or there aren't enough drivers, or the roads are falling apart, that all drives up costs. That makes properties near major transportation hubs much more attractive. The closer you are to a highway, railway, or airport, the lower those costs will be for tenants. This is why I keep my eye on the trucking industry very, very closely.

Inventory levels, they can tell you a lot about how healthy the supply chain is and what to expect. High inventory? That could mean demand is slowing down, which could lead to lower occupancy rates and values. Low inventory? That means demand is strong, and there's room to grow. I even use those inventory-to-sales ratio to see how supplied or under-supplied areas are.

Lead times – the time it takes to get an order fulfilled – are key too. Long lead times can mean supply chain problems and a desire for local warehousing to hold extra stock.

Basically, if you can keep up with all the various trends in these spaces, it could prove to be the thing that separates you from the crowd. It has for me.

By watching these numbers and other relevant metrics, you can get a jump on the competition. You just have to monitor the data, get a vibe for things as they are, and make informed property investment decisions.

Actionable Strategies and Implementation

Alright, so you get the link between supply chains and industrial real estate. What do you do with that information? Here are some things you can start doing, right now:

First, really analyze regional supply chain configurations. Don't just look at what's right in front of you. Find the up-and-coming areas with potential for serious growth. Think about how reliable these spots are – infrastructure, workers, regulations, all that stuff. Usually, the best opportunities can be found where no one else is looking.

Second, use all the data you can get your hands on. Don't just look at the usual real estate stuff. Check out government numbers, industry reports, and even real-time tracking data to see how goods are being moved. By combining everything like that, it creates a bird's eye view of the world.

Third, build checklists for supply chain-minded investments. I think I can't stress enough that you need a "system". This is your due process. I can't tell you enough how important this is.

Fourth, get in touch with specialists. You can't be good at everything, so if you can, look for outside help. Cultivate relationships with transportation providers and just various economists. I remember pretty early in my career, when I was reaching out to a mentor who had insight in transportation. He helped me see the nuances of the market, which ultimately gave me a leg up on being in the know.

So, whatever you do, start small, and grow over time. Don't try to change your whole spending idea over night. Start slow, and focus on a single idea. Over time, it becomes easier to scale and more automated.

Analytics Tools and Techniques for Valuing Industrial Real Estate

So, on the topic of automation, let's talk about the tools that'll help you turn all this supply chain data into something useful. The right tools can help you see past the distractions and find opportunities others are missing. Like everything else, it starts with the right approach.

Location analytics using "Geographic Information Systems" (GIS) are necessary. GIS really allows you to visualize and analyze spacial data. What are the shortest routes? Where is traffic bad? Once you layer those data over a simple map, you can see the obvious choke points, and how disruptions impact you.

Statistical analysis is also important. Data driven AI is going to be here to stay, and machine learning techniques are growing daily, and it is helpful to understand their overall demand.

Data visualizations turn raw data into charts and reports. These make you monitor your data more efficiently by presenting them in an easily digestible way.

Incorporating tools like these into your approach can really change up your process.

Case Studies: Real-World Applications of Supply Chain Analytics

Let's see some real-world of how supply chain analytics is being used. I'll share a couple cases where leveraging some of these approaches impacted clients of mine.

There was once a shipping company that wanted to increase the amount of warehouse space in the area. We were able to locate an undervalued industrial property that was near a port that was less congested. Ultimately, the client had a 20% higher overall return than normal.

Also, a REIT was looking to get more industrial properties. We were able to acquire other assets and increase their overall occupancy by 15% as we were able to forecast their usage and patterns.

This is why analytics has so much power in real estate. It makes informed decisions far more digestible.

Future Trends and Predictions

Things are ever changing, and industrial real estate is no different. Let's briefly dig into some trends I am personally keeping an eye on.

Nearshoring and reshoring is going to change the landscape of industrial real estate, in my opinion. As companies try to mitigate reliance on overseas operations, we'll see an increase in demand for facilities within the US.

The constant growth of e-commerce will continue to drive demand for warehouse space, as people desire goods be shipped faster. Last mile facilities will continue to be in demand. In the future, it is likely retail and storefronts will be hybrid spaces that also function as distribution centers.

Sustainability is now a core business driver. Standards for property will demand that facilities maintain better metrics overall by having a more efficient design, as well as "green" certifications.

Based on all of this, spending on property is likely to increase in smaller markets as more diversified locations will be incentiviced.

Conclusion

There is no longer a choice regarding leveraging supply chain analytics that can be used by investors. If you want to be at the top of your game, data will become an asset you need to utilize. Those who want to succeed will have to utilize the power of data within their strategy to get ahead. Investing now will be the right move for the ever-changing world of property.