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Asia ports and those along the West Coast of the United States will expand their roles as global logistic hubs during the next decade, according to a recently released research report.
The report, prepared by CBRE Group, Inc., highlights 20 markets that are poised to become global logistics hubs in the next decade. Among the 20 are China’s Beijing, Hangzhou, Nanjing, Suzhou ports, as well as South Korea’s port at Busan and Seattle, Wash..
Other emerging logistics hubs include Philadelphia and South Florida, USA; Santiago, Chile; Bajio, Mexico; Istanbul; Berlin, Munich and Ruhr, Germany; Madrid and Barcelona; Amsterdam and Tilburg/Eindhoven/Venlo, Netherlands; Leeds/Sheffield and Manchester/Liverpool, UK.
The recently negotiated Trans-Pacific Partnership (PPT), if ratified, will enhance the Pacific Rim’s value in the shipping of tea and coffee around the world.
“As governments continue to draft new trade agreements and amend labor laws, new trade routes are becoming more accessible and more integrally connected with existing strategic routes,” Dr. Henry Chin said in a CBRE statement. “The Trans-Pacific Partnership is a potential trade agreement that will have drastic effects on global trade routes and manufacturing demand in Asia.”
Dr. Chin is head of research for CBRE Asia Pacific.
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The comprehensive Trans-Pacific Partnership includes 12 countries in the Pacific Rim – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam – and seeks to lower trade tariffs, streamline cross-border regulations, and increase market access between the member countries for a wide range of products, including coffee and tea.
“With increased market access and lower trade barriers, the amount of goods moving through this trading bloc is likely to increase,” Dr. Chin said in the statement. “For example, as manufacturing demand shifts to Southeast Asia, local ports in Vietnam may experience increased port calls, and regional hubs in Malaysia may grow in prominence. Stronger demand for agricultural land and logistics facilities, with the projected increased output of agricultural products from Australia and New Zealand, is also expected.”
Defining a global logistics hub
Emerging logistics hubs share characteristics, including significant investments in infrastructure, new trade policies and agreements, and more advanced supply chains and technologies, the report stated, citing a 600% growth in global trade during the past 35 years. This drives the development of more complex supply chains around the world.
A viable logistics hub connects a variety of transportation modes. (continued pg. 27)
“The core of this international trade is the flow of goods through supply chains that connect raw materials, production and delivery to consumers worldwide. Infrastructure, accessibility, market size and business environment are all integral factors to ensuring efficient supply chain flow,” said Richard Barkham, CBRE’s global chief economist. “Logistics hubs are the main driving force behind the industrial real estate markets and are at the center of large clusters of distribution facilities.”
Other factors
Infrastructure investments - Physical improvements to regional transportation infrastructure can increase the viability of a location for substantial international trade. The report cited the re-emergence of the Silk Road in Asia, the oldest overland trade route stretching from China to Central Asia, and then to Europe’s border. China launched a new strategic initiative in 2013 designed to revive the viability of the trade route
The new Silk Road will have two parts - the Silk Road Economic Belt, a land-based route that will connect central China to the Middle East and Eastern Europe, and the Maritime Silk Road, a sea-based path that will link South China to Southeast Asia, East Africa, and Europe. “These two strategic routes may shift global supply chain dynamics and result in the creation of new and important logistics hubs along the routes,” the report stated.
Demographics - As living standards around the world continue to rise, new markets and customer segments are opening to global suppliers. Rapid population and economic growth around the world, especially in emerging Asia markets, has altered the shape of consumption and the distribution networks in place to serve these populations.
Supply Chain Trends - Larger trends in the global supply chain can shape the emergence of global hubs. In Asia, low-end manufacturing—such as garment and textiles production and electronics component assembly—has steadily been moving from Southern China to Western China and Southeast Asia. Southern China, encompassing the Pearl River Delta, has traditionally been the light industrial manufacturing center of the world.
As wages continue to rise, however, and China attempts to move up the manufacturing value chain, there has been a shift to more sophisticated heavy industry manufacturing.
Technological advancements - “E-commerce continues to be one of the main driving factors for modern logistics developments and networks across the region. With a trickle-down effect to inventory management, this leads to changes in the global supply chain network,” said Dennis Yeo, regional head of Industrial & Logistics Services for CBRE Asia.
“Speed-to-market is more important than ever. The service demands brought about by e-commerce—for example, shorter delivery times to consumers—has changed the entire retail supply chain of getting goods to consumers, including regional distribution strategies,” he said. “The technical ability of locations and buildings to support the ever-increasing demands for both scale and speed of output is an ever-more important determinant of market position.”
Source: CBRE