CREJ

December 2021 — Office & Industrial Quarterly — Page 19 www.crej.com INSIDE State of the market PAGES 20-22 Areas to watch PAGE 28 Outdoor storage PAGES 24-26 Articles about demand, development and lending for Denver area industrial assets Colorado’s secondary markets are primed for success as activity continues to expand A “not in my backyard” attitude makes life difficult for users, and owners are responding December 2021 T his year will go down in his- tory as the year the term “supply chain” moved out of the boardroom and into mainstream culture. he breakdown in the supply chain began with the onset of the pandemic when many factories that produce goods shut down in an effort to contain virus spread and prepare for the impending economic downturn that would ensue. Wide- spread shutdowns left dozens of container ships either dry-docked or sold for scrap as the steel was worth more than payment on the idle ship, leading to a significant reduction in container ship liner capacity. As ship capacity declined, imports rose, now up by almost 15% relative to 2019, which is creating even longer delays. These supply chain disruptions are forcing companies to rethink their strategy, and metro Denver is emerg- ing as an attractive target for new bulk distribution and last-mile facilities. Driving much of the increased demand for goods is a shift in inventory strategy. Pre- pandemic, retailers operated from a “just-in-time” strategy, keeping just enough on hand to keep shelves stocked based on typical buying patterns. Then the pandemic hit, shoppers stocked up in a panic, and many store shelves sat empty for days or longer. To avoid a reoccur- rence, retailers are now establishing “safety stock” inventory protocols, doubling or tripling their warehouse requirements in some cases. On top of demand for increased inventory and shipping delays, sup- ply chain issues are compounded by a labor shortage. In the U.S., nearly 50% of the truckload industry historically has been independent owner-operators. The suspension of business and initial shutdowns that occurred early in the pandemic pushed many of these operators into early retirement. Drivers immedi- ately found other work in construc- tion and other sectors and never returned to the trucking industry. In addition, a combination of fear of COVID-19 and federal economic relief funding kept some labor at home. With too few drivers, the goods that do arrive in ports are tak- ing longer and cost more to move. Pre-pandemic the average truckload cost per mile was $2 to $2.25. Today it is $3 to $3.50, which is a 50% increase in shipping cost per mile. This increase in shipping cost and rising pressure to deliver goods in Please see Trends, Page 32 Bulk distribution and last-mile facilities target Denver Todd Witty Senior vice president, Denver, CBRE In early 2020, in partnership with Hyde Development, Mortenson purchased an undeveloped, 125-acre land parcel in Aurora, with plans to develop the acreage into HighPoint Logistics Park, a 2.2 million-square-foot industrial park near Denver International Airport. Prior to 2020, Denver had only five industrial buildings over 1 million sf. Today, there are three new buildings over 1 million sf under construction and five additional active requirements for over 1 million sf across the metro area.