- Hi, I'm Chad.
I'm producing a series of videos on investing
in industrial real estate.
And even if you're not planning on investing any time soon,
I think you'll still get some value
if you're just looking to learn more about the industry.
In the first video, I talk about how industrial buildings
all share one key process in common.
Things come in,
those things are either stored or worked on,
then those things go out.
I want to elaborate on the importance of that topic
in more detail,
because products coming into and out of a warehouse
are not just an integral part of industrial real estate,
but to the economy as a whole.
And to fully understand what industrial real estate is,
we must also understand why companies need warehouse space
and how it fits into their overall business.
I'll also introduce an important concept
called last mile delivery
and how it's completely altering the economic landscape.
So let's jump into it.
This story starts with how I got this pen.
It was heroic journey for this little guy
and it all started in a factory in China.
I wasn't there to verify, but I'd like to imagine
it was the steady hands of a talented artisan
who delicately assembled the raw materials
such that the end product greatly exceeded
the sum of its individual parts.
- Sell me this pen.
- And this one and thousands like it were assembled.
They were packaged into boxes
and put onto a truck eastbound towards the South China sea.
Once it reached the port of Hong Kong,
the boxes of pens were then combined
with other goods into shipping containers.
Now the pen is the hero in the story,
but those containers are the supporting cast.
The idea of shipping products by containerization
was popularized by a guy named Malcolm McLean,
and his impact on modern business can not be overstated.
Countless amounts of products are shipped
across the world in these containers each and every day.
When he died in 2001, container ships all over the world
blew their whistles in his honor.
Sometimes these containers are called sea cans or TEU's,
which is short for 20 Foot Equivalent Units.
In practice, it's much more common to see
40 foot equivalent units, meaning they're 40 feet in length
but the abbreviation TEU has stuck as an industry standard.
The sea can now holding my future pen
is then loaded onto a cargo ship
to begin the journey across the Pacific Ocean.
Another quick side note,
some cargo ships can now hold 20,000 or more TEUs.
But back to our story,
once the cargo ship hits the landed port
somewhere in North America, the sea can
is loaded onto a rail car to begin an equally
arduous journey across the continent.
Once the train hits this destination,
the sea can is then loaded onto a flatbed
of a semi-truck on route to a warehouse.
At the warehouse, The goods are unpackaged, sorted,
and repackaged to then head out to a retailer.
I bought this pen from that retailer.
This whole process is called a supply chain
and the steps involved in moving product along the chain
are the modes of transportation.
Since there are multiple modes
in this particular supply chain,
we can subsequently call it intermodal transportation.
But here's the plot twist to my story.
About this a few years ago
from a bricks and mortar retailer.
This pen, in my other hand I bought a few months ago
by ordering it online.
This pen still had to make it overseas
to a warehouse in North America,
but the next step in the supply chain differ dramatically.
This pen went from a warehouse to an airport
by way of a delivery van,
which then flew across the country.
When it reached the airport in my city
it was then delivered to a FedEx location
which was then delivered by a delivery van to my house.
Not all products online will be shipped by airplane
but the fact that the pen came directly
to my house represents a dramatic shift in the system.
Well, the traditional model was to have the supply chain
and with the product being delivered to the retailer,
there's been a shift away from shop and take home
towards order online and have delivered.
In other words, some consumers are skipping
the bricks and mortar altogether.
Not all the time, of course, but enough times
that e-commerce has caused some companies
to make significant adjustments along the supply chain.
And this is where the concept of last mile delivery
comes in.
The last mile is an arbitrarily set distance,
meant to imply that it's simply the final stage
of getting the product to the customer's doorstep.
It's not actually a new concept as the term has been around
for a while to describe the final stage
in connecting utility services, phone lines,
or even people.
The concept has recently been expanded
and gain more popularity,
as it's now used to address how e-commerce companies
have to complete this final stage of the supply chain.
As you could expect, companies want to simultaneously
accomplish the task
of getting product to consumers doorsteps
as quickly and efficiently as possible.
This requires a rethink of the supply chain
combined with a considerable amount of infrastructure.
This is why you've probably noticed
a lot more delivery vehicles on your street
and a lot of new warehouses in your area.
It all leads to one undeniable fact,
e-commerce has fueled demand for more warehouse space
all over North America and the world for that matter.
I've worked as an industrial real estate broker
for the past 15 years,
and I can attest to how the asset class often works
out of the spotlight.
But this recent increase in demand for warehouses
just so happens to coincide
with the uncertainty in the office and retail markets.
This also helps explain why industrial real estate
has quickly become a sought after asset class for investors.
I'll illustrate this in just a moment,
but first I could really use your help.
I'm developing this series of videos
to help you learn more about industrial real estate
as a potential investment.
Perhaps it's something you consider investing indirectly
or indirectly through the stock market.
But my goal is to simply teach you
as much as I can about the industry.
If you get any value,
please support this channel by subscribing to my channel
and tapping that thumbs up button below.
But back to my point about industrial real estate
looking attractive.
A number of stocks are actually out performing
other asset classes.
We can look at the graphs
of a few large real estate players to illustrate this.
Boston properties, a large RE
which owns office buildings and major markets
all across the US is down over 40%
from its high earlier in 2020,
while Simon Property Group
which is the largest shopping mall operator in the US
is trading in less than half of where it was last year.
Even Equity Residential
which owns nearly 80,000 apartment units in the US
is down 25% from the same time last year.
Contrast this to Prologis,
which owns a significant industrial portfolio
and is near all time highs.
These examples aren't unique to large property owners either
as I'm seeing this trend across all sizes of properties.
I don't see this trend reversing anytime soon, either.
So if you wanna learn more about the industry,
please consider subscribing and hit that notification bell,
so you get notified when I post my next video.
And the next one I'll go into important components
of warehouses in much more detail.
So thanks for watching, have a great day.
It's the increase in size of these ships
which recently prompted the Panama Canal
to spend over $5 billion to increase its capacity.
Now, these behemoths ships can go
shave a considerable amount of time
from having to go all the way around South America.
This could have been the first obstacle or hero faced
but instead Panamanian officials paved the way.
Dug the way.