GLOBAL MARKETS Globalization and outsourcing have irrevocably altered the production and distribution of consumer goods. Over 90 percent of world trade now moves by sea, and in the world's top 15 container ports, annual container volume has nearly tripled in the past 12 years. As a result, supply chains have increased in length and complexity. These changes are driving demand for new types of distribution centers and new locations. For example, in Japan, companies are moving toward leasing rather than owning distribution facilities. Our facilities there have multiple stories due to land constraints. In China, demand for distribution space has grown dramatically in coastal markets, while in Europe and North America, new inland ports are being established to support global trade. All these trends drive continued strong global demand for modern logistics space in port-related markets.

Container volume in the top 15 global ports increased by 11 percent in 2006, underscoring the importance of our presence in the world's largest port markets.

Today's consumers reject one-size-fits-all products and opt instead for those more suited to their individual preferences. Satisfying these demands has led to a proliferation of products and driven changes in distribution networks.

Among the trends driving demand for distribution space is the consumer's desire for choice and availability. Contributing to the explosion of stock keeping units, or SKUs, are retailer requirements for private label brands, custom labeling, store-ready displays and promotional packaging. Globalization also plays a role. Products must not only be modified to meet regulatory requirements of different countries, but labels must be translated into multiple languages. As the number of SKUs escalates, so does the need for additional distribution space to accommodate them. Supply chain executives face competitive pressures to improve product availability and reduce operating costs. These challenges underscore the importance of logistics as a competitive advantage. The location of distribution facilities becomes critical as companies use supply chain management to optimize inventories and become more efficient.