In the News
Giant Footsteps: A Conversation with GLP's Chuck Sullivan
Source: Site Selection
This article appears in the January 2016 issue of Site Selection magazine.
A conversation with GLP's Chuck Sullivan, President and COO, US Operations, Global Logistic Properties (GLP)
Global Logistic Properties was founded in 2008 when the late Prologis leader Jeffrey Schwartz and GLP CEO Ming Z. Mei partnered with Singapore’s GIC Pte to buy Prologis’ China operations and a stake in its Japanese property funds. GLP serves some 4,000 customers across a 521-million-sq.-ft. (48-million-sq.-m.) portfolio. Chuck Sullivan, former head of global operations at Prologis, was named president and COO of GLP’s US operations in February 2015 as a part of its acquisition of Blackstone’s IndCor Properties.
Site Selection: GLP's growth curve has been incredibly rapid. Describe the company’s evolving global perspective on location choices.
Chuck Sullivan: Strategically, we're focused on being the best operator. We create value through development and our fund management platform. How do we make the location decision? We spend a lot of time with our customers. We understand logistics costs, and we understand how our customers' logistics channels work. We are organized by industry internationally. That gets us closer to the customer. We understand where they want to be, why hubs are important to them, and how we can ensure their presence in the key markets.
Our business customers are looking for optimization of their supply chains, and they're looking for best in class. It’s easy to drive cost out of other parts of companies, and eventually they get to supply chain. We're also seeing more leasing than owning of facilities.
We have the network effect — tying our platform to the customers’ needs. The portfolio in the States mirrors the nature of our international portfolio, in 32 key markets. In China we are in 36 key markets. In Japan, 86 percent [of the GLP portfolio] is in Osaka and Tokyo — those markets are 2.1 percent and 2 percent vacant, respectively. In Brazil, 88 percent is in Rio and Sao Paulo. We see a great opportunity for growth in meeting logistics needs. In the US it's termed “same-day.” In China, a huge emerging middle class is driving frankly unprecedented consumption. And there's a huge emerging middle class also in Brazil.
Site Selection: Where are the globe’s most challenging logistics locations, where capacity is needed, but infrastructure deficits, government policies or corruption are hampering forward progress?
Chuck Sullivan: While logistics is our focus, transportation and logistics go together. Logistics and transportation infrastructure in Brazil — and even energy infrastructure — have not kept pace with growth. That’s one reason we are so focused on just Sao Paulo and Rio, because, frankly, that's where the major progress has been made. There are political and economic headwinds right now, and we believe in the long run it will catch up ... There is some talk they’ll have to slow down the infrastructure investment. Procter & Gamble, Unilever and Colgate have opted to do business with us because we're delivering a modern logistics facility. In Brazil, modern only accounts for about 20 percent of the total supply.
I did an interview with you many years ago, when I’d gone to Mexico and started up a Mexican operation with Prologis. It was similar [to Brazil] at the time. That Latin American country is a blueprint. They recognize what is needed, and they do make the investments. People typically think of energy and roads, but it’s ports too. I was down there not too long ago — all of the things they’d talked about doing many years ago that would have taken 25 years [back then], got done very quickly. In China, the infrastructure has moved much more dramatically forward than anyone would have expected. Every city has new roads and new feeder roads, pretty impressive transit, and new airports ... the necessary infrastructure that the logistics industry really needs.
Site Selection: Describe your own team's internal logistics when it comes to site visits and asset evaluation across such an instantly huge portfolio.
Chuck Sullivan: When we look at an acquisition, we get down to the asset level — we spend a great deal of time looking at who our customers are, and what they are looking for. In the US, a great degree of the portfolio built up by Blackstone as IndCor was infill markets. No one has a perfect definition of what infill might mean, but we like to say “very proximate to population bases, and close to last mile of delivery.” In excess of 70 percent of our US portfolio is infill in nature. As we see an emerging e-commerce trend in the US and globally, that becomes more valuable. Amazon gets the headlines, but every other customer is giving thought to better, faster, cheaper ways to deliver the end product. So you need to have facilities proximate to population centers as ever. You’re not going to deliver a box for free from 1 million square feet in the heartland to the East Coast. I can’t overstate that, because China is leapfrogging it — they've moved well beyond the traditional bricks-and-mortar retail store in terms of e-commerce.
Site Selection: How do you and your colleagues collaborate devise a logistics solution for a client looking for space in multiple geographies?
Chuck Sullivan: We have approximately 50 global clients today. The top 10 are a mix of retailers and 3PLs [third-party logistics providers]. We survey them, and their driving force for location decisions is proximity to population centers and speed of delivery. We use our network effect to effectively avail to them our portfolio, and our operational expertise in those markets. In the US, the logistics market is fairly mature, and in many cases commoditized. However, when you get into the infill markets, it’s a bit more of a challenge to those customers. A lot of these folks want to be very, very close to the urban center. But you don't put a 1-million-square-foot building next to downtown Chicago.
Site Selection: As e-commerce principles become more and more a part of the manufacturing world and the “Internet of Things,” do you see GLP getting more involved in B2B and corporate internal supply chain logistics?
Chuck Sullivan: In the US, we do not do that today. Frankly, there’s a fairly sophisticated group within the US in the third-party consulting and the 3PLs, who do it quite well. As you move into the less developed markets, there are opportunities to provide customers network data and information. We particularly are focused on that in China — we survey customers and ask them if that would be a value proposition. Also food and cold chain logistics — there are value-add opportunities in supply parks. It's not a new concept — you have auto manufacturing, and the logistics hub-and-spoke around that. It’s not our business to be in auto manufacturing, but it is our job to manage logistics for that. In China, our folks are industry-specific — we have colleagues specifically focused on automotive, for instance, to provide better value.
Site Selection: Cold chain in particular seems beset by slowdowns in ports because of customs.
Chuck Sullivan: A lot of the very high-value-added product traditionally moves by air, and even then we've seen slowdowns. Today, we're seeing a lot of that shift toward rapid movement through ports. Candidly, there are a lot of things going on in the supply chain that can expedite the process. In fast-track movement of goods through ports, from ports to intermodal facilities those goods go long distances before they pass through a slowdown or a customs blockage. But customers are typically somewhat cynical about government's ability to service that, so they set up redundancies in the system. And the costs in the system are in those redundancies. I'm not certain, in the current political environment we’re in, whether those costs can be wrung out. There could be more border stoppage down the line. But we talk to customers about their major concerns, and the movement of goods seemed to have been improving. There are lots of examples of how goods are moving more efficiently and faster.
Site Selection: You were a big part of pioneering logistics developments and innovations in your years with the late Jeff Schwarz at Prologis. How do you see your team’s work carrying forward his legacy as you envision logistics facility and network innovation and design five years or 10 years from now?
Chuck Sullivan: He was a very good friend of mine. I started with Jeff in the business many, many years ago. He was very forward thinking — probably one of the first to contemplate serving the customer on a global basis in the industrial arena. If not for his vision, we wouldn’t be talking today. He brought together one heck of a team. The GLP management team were working together because of Jeff many years ago. I think he'd be very proud to see where we are today, and certainly where we're headed.