In this video clip from "Real Talk" on Motley Fool Live, recorded on Feb. 25, Calvin Schnure, Senior Vice President of Research and Economic Analysis for the National Association of Real Estate Investment Trusts, explains how supply chain bottlenecks happen, how they ease, and what role Real Estate Investment Trusts (REITs) play in the process.
Calvin Schnure: There are several parts of the production and supply chain that are worth keeping in mind. Back up a little bit, so I go the whole way upstream. Some of the things that are in short supply right now just aren't being produced and because of global supply chain networks, they're coming in from Asia. Whether it's from China, Taiwan, Korea, Vietnam, or so on and production is still limited there. It's not even a question of getting the goods through the pipeline. They're not even into the pipeline yet. We need to see further progress in the production ramping up. Then the next question is, what about getting them to the shores of the U.S.? The container ships, the tankers, and then getting them through the ports. There are some signs of those bottlenecks are easing up a little bit. The backlog at the Port of Los Angeles is not as bad as it was three months ago, but it's still has a long way to go. The final component is how are they transported inside the U.S., and this is something that relates to REITs because the REITs own, many of them are involved in, the industrial logistics supply chain infrastructure.
First of all, the utilization rates are sky-high. We're seeing record-high occupancy in industrial logistics properties. Again, these are the ones that are used for offloading something from a plane, a train, a truck, and then transferring them for the last-mile delivery. But the other thing is the construction of industrial logistics facilities is at a record high construction as a share of existing stock. It is surging and this typically takes nine months up to a year for many of these to be operational. This is saying that the private sector response to tight supply chain and rising rents and high prices has been to produce more. This is what we need. We are building out our internal infrastructure in the industrial logistics that is the key backbone of the domestic part of the supply chain. Again, the REITs are very involved in this. Some of the REITs announced that they have also increased their construction and acquisitions of these properties. This is going to help get the goods to the consumers, to the other businesses. Through the middle of the year, second half of the year and beyond, I think we're going to see an easing of conditions largely because of these improvements in the supply chain.
