Global Supply Chain Trends and the Impact on North American Distribution Markets

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Global Supply Chain Trends and the Impact on
North American Distribution Markets
Greg Arnold Mike Peters October 1, 2007
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Global Platform Local Presence

• Over 446 million square feet, located in 105
  markets and 20 countries
• Over 1,300 ProLogis associates located around the
  globe to support our customers

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Logistics Cost Breakdown
8.8
1.9
0.2
0.7
1.5
4.4
Rent/building cost is 25 of this number.
Source Herbert W. Davis and Company, 2006
database
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World Trade Growth
World Trade
Index 1988100
World GDP
Growth in World Trade and World GDP, 1988-2005
Sources OECD, Haver Analytics, ProLogis
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U.S. Imports From China
China Admitted to WTO
US in billions
Source U.S. Census Bureau
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Seaports vs. Airports
Total Cargo Volume - 2004
Metric tons, in millions
1.65 billion metric tons
.056 billion metric tons
Seaports handle more than 95 of world cargo by
volume
Sources UN Review of Maritime Transport 2004,
ACI Traffic Data for 2004, ProLogis
analysis Estimate based on reported cargo volume
for Top 30 global airports
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Globalization and Outsourcing
Cargo containers in Shenzhen, China
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Ship Entering Long Beach
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Loading Containers on Chassis
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Intermodal Double Stack Train
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TEU Growth at Top 15 Container Ports
1996
Number of TEUs
10,000,000
5,000,000
Total TEU 68,300,000
2,000,000
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TEU Growth at Top 15 Container Ports
2006
Number of TEUs
20,000,000
15,000,000
10,000,000
Total TEU 68,300,000
Total TEU 188,000,000
5,000,000
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Top 15 Container Ports Worldwide - 2006

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Chinese Infrastructure Investment
Bridge
Lingang Industrial Area
Port

• Yangshan Deepwater Port opened in December 2005
• Connected to mainland near Shanghai by 20-mile
  sea bridge
• Port will be worlds largest at full buildout
• Total capacity of 25 million TEUs (exceeds
  combined throughput of top three US ports -
  LA/LB, NY/NJ Oakland)

Photo Sea Bridge to Yangshan Deepwater Port
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Yangshan Bridge
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Yangshan Port
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ProLogis Park Lingang Aerial Perspective
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Modern Distribution Facilities
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Transit Times
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North America Container Market Share
Source Containerization International Some
2006 data estimated
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Container Volume Growth
Source Containerization International
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North America Port Activity
Source Containerization International, port
websites
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Regional Intermodal Volume
The midwest and southwest regions handle more
volume than all other regions combined.
Mtn Central CO, ID, MT, NE, ND, SD, UT, WY
Midwest IL, IN, IA, KY, KS, MI, MN, MO, OH,
WI Northeast CT, DC, DE, ME, MD, MA, NH, NJ,
NY, PA, RI, VT, VA, WV Northwest OR, WA South
Central AR, LA, NM, OK, TX Southeast AL, FL,
GA, MS, NC, SC, TN Southwest AZ, CA, NV
Source Q4-06 IANA data
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Intermodal Volume Growth
Intermodal Volume Growth
Source IANA, Containerisation International
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A Good Business
Union Pacific Intermodal Results
Source UP Investor Factbook, Yahoo Finance
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Share N.E. Asia U.S. East Coast Route
Source Panama Canal Authority
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Panama Canal - Update

• 48-mile canal built in early 1900s
• 14,000 ships/year
• Maximum capacity-container ships 5,000 TEUs
• Largest container ships being built today carry
  10,000 TEUs
• US5 billion expansion approved by Panamanian
  voters in 2006
• Adds new, wider locks

• Expected to double capacity when completed in
  2014
• Secondary ports on Gulf Coast and East Coast
  anticipate surge in traffic following project
  completion

Photo Sealand Meteor at the Panama Canal (3,800
TEUs)
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Worlds Largest Container Ship
Emma Maersk
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Worlds Largest Container Ship
Emma Maersk
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Population Based Network Model
The 10 Best Warehouse Networks Networks with the
Lowest Possible Time-to-Market

Source Chicago Consulting
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Major retailers - Import DCs
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Metrics Driving Industrial Real Estate Demand

• Key metrics in evaluating top port markets for
  future distribution centers
• Proximity to large local population base
• Physical port capacity for growth in TEUs handled
• Good road infrastructure from the port
• Inland ports intermodal rail connections
• For export markets, proximity to diverse
  manufacturing centers (e.g. Shanghai)
• Availability and cost of labor, degree of union
  activity, and risk of labor strikes
• Frequency and availability of dedicated liner
  service

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Challenges for Developers

• Land Availability
• Entitlements
• Brownfield Development
• Community Issues
• Sustainability

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Sustainability
Lighting retrofit program - USA
Rooftop solar panels Paris
LEED certified ProLogis Headquarters
Enhanced natural lighting - UK
Brownfield redevelopment NJ
Rooftop solar panels Spain
LEED certified - Chicago
Wind turbines Osaka
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Future trends as we see it

• Warehousing moving closer to inland
  ports/Intermodal Terminals
• Drayage costs
• Railroad Service
• Increasing flexibility in supply chains
• Potential Labor and Bottleneck Issues on West
  Coast
• Diversified Port Strategies
• Continually changing sources of supply
• Distribution Network Adjustments
• New network rationalization
• Deconsolidation centers as additions to network

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Final Thoughts

• The LA Industrial Market will continue to be
  strong
• More containers will leave the ports on trains
• Shifting sources of supply will drive network
  reconfiguration for some companies
• Security concerns could create a major bottleneck
  at our ports
• China is investing heavily in port
  infrastructure, they believe exports and imports
  will continue to grow
• Will the U.S. invest appropriately in
  infrastructure to continue to grow world trade?

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Mike Petersmpeters_at_prologis.com303 567
5770Greg Arnoldgarnold_at_prologis.com609 409
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