Logistics Hotspots: Nine That Shine

Tags: Economic Development, Site Selection, Logistics, Supply Chain

These U.S. cities and areas are rising as major logistics hubs and go-to distribution center sites.

As U.S. manufacturers and distributors continue to expand their operations, they often look for under-the-radar places—cities and areas that have either recently emerged as logistics and distribution center hubs, or are about to—as they consider the long-term effects of their developments.

A variety of factors must be considered if companies intend to compete globally, especially as the logistics sector continues to evolve. Accessibility to a wide range of transportation modes, import and export opportunities, and industrial space are critical.

Recent trade statistics, cost effectiveness, and proximity to the highest percentage of customers possible are also vital components of manufacturing and distribution center expansions and relocations.

The following nine cities and areas provide manufacturers and distributors a multitude of such benefits, as they have either recently emerged as hot spots for distribution centers, transformed into major logistics hubs, or are preparing for future growth to help maintain their status as prime manufacturing and distribution center locations.

1. COLUMBUS: LOGISTICS EXPANSION CONTINUES

Although Columbus, Ohio, has long been a hot spot for siting distribution centers, more than 100 logistics expansion projects were completed in the region in the past five years alone, primarily due to the emergence of e-commerce demand in Ohio.

"Because speed is critical to efficient customer service, more and more East and West Coast companies set up their distribution centers in central Ohio," says Matt McCollister, senior vice president, economic development, Columbus 2020. "In less than one day, companies can reach half of the U.S. population and one-third of Canada's—that kind of proximity is unmatched."

Columbus also is renowned for the Rickenbacker Inland Port, a high-speed international, multimodal logistics hub. The port features the Rickenbacker Global Logistics Park, which provides more than 60 million square feet of distribution space, as well as access to the Port Columbus International Airport.

The port is also home to the Rickenbacker International Airport, which provides 500,000-plus square feet of air cargo facility space and two 12,000-foot runways. Companies also can transport goods via rail through the Norfolk Southern Heartland Corridor, which provides service between Columbus and Virginia's Port of Norfolk, and the CSX Gateway connecting Columbus to deep-water ports in New Jersey, Washington, D.C., and Wilmington, N.C.

Furthermore, 51 percent of Columbus' roads have been rated as being in good or fair condition, the fourth-highest percentage in the United States, according to Columbus Region. Currently, the region's eight major interstate highways provide access to a high percentage of the U.S. market—47 percent—in 10 hours or less, according to John Meier, marketing director, ODW Logistics.

2. EASTERN PENNSYLVANIA: EPICENTER OF GROWTH

In recent years, Pennsylvania's I-78/I-81 Corridor has transformed into a logistics hub and epicenter of growth and activity. That's because it is centrally positioned (approximately 100 miles) from Baltimore, New York, and Washington, D.C., and provides extended access to Northeast and East Coast ports.

Approximately 30 million people live within a 100-mile radius of the corridor, according to Douglas Kiersey, Jr., president of industrial real estate developer Dermody Properties. Additionally, companies can connect to 40 percent of the U.S. population in a one-day drive, a critical aspect in location decisions during the e-commerce era.

"Eastern Pennsylvania supports e-commerce, as well as ground transportation," says Kiersey. "As a result, the fast-growing I-78/I-81 Corridor is comprised of logistics and distribution companies, major retailers, and high-quality manufacturers."

As new businesses locate to the state, and to the corridor, the square footage of Lehigh Valley's industrial properties has risen by nearly 30 percent since the end of the Great Recession, according to David Egan, head of industrial and logistics research, Americas, CBRE, a commercial real estate services firm. In addition to attracting new businesses, Pennsylvania has also improved and built a number of highways, including Route 33, an interchange project that was completed in late 2015.

The addition of the new Route 33/Main Street interchange, was the catalyst behind Dermody Properties' new development —LogistiCenterSM at 33, which is now a suitable location for warehouse, manufacturing, and distribution operations.

"A large share of the U.S. population needs to be within one day's drive to the epicenters of commerce," Kiersey adds. "The central Pennsylvania region provides that sophisticated network modeling."

3. GREENVILLE-SPARTANBURG: RECORD LOW VACANCY

For years, Greenville-Spartanburg has been regarded as the main manufacturing hub of South Carolina, a state that exports more goods per capita than any other southeastern state, according to CBRE. But its popularity has increased recently for two primary reasons: the development of the South Carolina Inland Port, and the growth of the Port of Charleston and its robust connection to the area.

"A significant volume of imports and exports that run through Charleston make a stop in Greenville and Spartanburg, and that has spurred demand for warehouse space," says CBRE's David Egan.

As a result, absorption of warehouse space has surpassed 1.5 million square feet every quarter since Q4 2015, resulting in a new record low percentage for vacancy: 7 percent.

"More than 900,000 square feet of industrial space was delivered in Q2 2016 (the last quarter in which CBRE released vacancy statistics) in seven properties," says Brian Reed, research manager, CBRE. "The largest is the latest speculative development, a 240,000-square-foot, Class A warehouse.

"All of the remaining space completed in Q2 2016 was not speculative," Reed explains. "The most notable examples were new facilities for Phillips Pet, Kobelco, and Coca-Cola. Combined, the three facilities account for more than 500,000 square feet of industrial space."

Greenville-Spartanburg is also a cost-effective location. Although it is one of the country's 30 largest industrial markets, it is also one of the least expensive, an ideal characteristic for investors who are interested in seeking rent growth.

In addition to being cost effective, Greenville-Spartanburg will continue to attract new companies, particularly those from the West Coast, due to the expansion of the Panama Canal, CBRE predicts. The expansion will likely lead companies to diversify operations by developing facilities in East Coast markets with reliable port access, much like Greenville-Spartanburg.

4. CHATTANOOGA: A 'GATEWAY' TO THE SOUTH

Chattanooga, Tenn., offers a trifecta of primary interstates—I-24, I-59, and I-75—that enable a one-day truck drive to more than 40 percent of the U.S. population, and a two-day truck drive to 80 percent of the nation's residents.

Due to its connectivity to a majority of the United States, a number of organizations have begun to expand their distribution centers throughout the area. As one example, FedEx Ground is currently completing a $30-million, 235,000-square-foot distribution center, which will open in August 2017. Whirlpool has developed a 400,000-square-foot distribution center in nearby Cleveland, Tenn., while Coca-Cola opened its new 305,000-square-foot distribution center in early 2016.

In addition, the city's location along the Tennessee River enables its accessibility to more than 16,000 miles of navigable waterways that connect to the Gulf of Mexico and the Great Lakes, according to the Chattanooga Area Chamber of Commerce. And a variety of carriers provide air service at the Chattanooga Metropolitan Airport, offering cargo and passenger service to all major cities in the United States.

"As manufacturers are attracted to the region, and the city continues to be recognized as a 'gateway' to the South, Chattanooga will emerge as a logistics hot spot," says Joe Taylor, vice president, business development, Tranco Logistics.

5. LOS ANGELES BASIN: THE INFLUENCE OF E-COMMERCE

As the second-largest metropolitan area in the United States, and home to the nation's busiest seaports—the Port of Los Angeles and the Port of Long Beach—Los Angeles has long been known as one of the country's top distribution markets. After all, 40 percent of the nation's imported products flow through these ports, according to Jason Tolliver, head of industrial research, Americas, for real estate services company Cushman & Wakefield.

But the region—particularly the Los Angeles Basin, which is comprised of the Inland Empire, Los Angeles, and Orange County—is growing even more popular as a major hub for distribution centers.

"The rise of e-commerce has led to a rapid acceleration in the use of space devoted to fulfillment centers, specifically in the Inland Empire portion of the market," says John Husing, chief economist for the Inland Empire Economic Partnership.

The Los Angeles Basin market currently has 1.87 billion square feet of industrial space; most of the newer space is devoted to goods movement, according to Husing. As the use of space for fulfillment centers has risen in recent years, a positive correlation has been documented in total employment. Since 2011, 55,865 of the 242,425 jobs created in the Basin's market have been in logistics. Currently, 746,800 Los Angeles Basin-based workers are employed directly by logistics firms—an aggregate that does not include self-employed truck drivers.

During Q1 2016, the Los Angeles Basin industrial market reported occupancy gains of 5.4 million square feet, while 10.2 million square feet was leased in Q1, more than any other region.

Trade volume also increased at the Ports of Long Beach and Los Angeles, rising by 9 percent between Q1 2015 and Q1 2016. During that time, import and export volumes both increased—by 7.7 percent and 6.9 percent, respectively.

6. LOUISVILLE: A NETWORK OF EVOLVING MODES

Louisville, Ky.'s network of transportation modes—including air, road, and rail—has steadily evolved over the past few decades to continuously meet the growing and advanced needs of the U.S. supply chain, according to Jessica Wethington, communications manager, Louisville Forward.

As an example, Louisville International Airport's UPS Worldport hub has developed into one of the nation's busiest air cargo hubs. It processes more than 400,000 packages per hour and turns over cargo for 130 aircraft per day, which, in turn, connects Louisville to 220 countries and territories, notes the Kentucky Cabinet for Economic Development.

Due to its proximity to the Ohio River, railways, and roadways (Louisville is located at the intersection of I-64, I-65, and I-71), Jefferson Riverport International, a contemporary port facility on the Ohio and Mississippi river system, has gradually become one of the nation's most accessible industrial parks. Home to more than 100 companies that mainly specialize in logistics and distribution or manufacturing, Jefferson Riverport International is served by three railroads—CSX, Norfolk Southern, and Paducah & Louisville. And, as a Foreign Trade Zone, it offers financial incentives to importers and exporters.

Louisville's distribution and logistics sector currently employs more than 12,500 professionals at 110 facilities, as it is located within one day's drive of two-thirds of the U.S. population, says the Kentucky Cabinet for Economic Development. Of equal importance, Louisville is positioned in the center of a 34-state distribution area in the eastern United States, a key factor as its transportation infrastructure continues to evolve.

7. NEW JERSEY: A RED-HOT LOGISTICS MARKET

Industrial development and leasing activity is currently "red hot" in New Jersey, especially in markets adjacent to ports, says Michele Brown, president and CEO of economic development agency Choose New Jersey Inc.

In 2015 alone, more than 3 million square feet of new space was constructed in the state—and another 6 million square feet is scheduled to be developed throughout 2016.

"More than $250 million is being spent to expand roadway capacity into and out of the state's ports," Brown says. "This expenditure does not include the $2.3-billion investment in the New Jersey Turnpike widening project—the largest ongoing roadway project in the Western Hemisphere."

The project, which is nearly complete, will improve approximately 35 miles of roads from Middlesex to Burlington counties to alleviate potential traffic from the north and south, as well as from New Jersey's ports. After all, the Port of New York and New Jersey is the largest on the East Coast, and the second-busiest seaport in North America, as volume rose by 10.4 percent from 2014 to 2015.

In addition to proximity to the Port of New York and New Jersey, the state also offers logistics companies access to one of the world's wealthiest consumer markets. Distribution centers in central New Jersey have the potential to serve more than 22 million consumers, who have approximately $800 billion in disposable income, in two hours or less, according to Brown.

As a result of this access, along with the growth of e-commerce, the demand for warehouse and distribution space has risen sharply in New Jersey in recent years. In fact, according to CBRE, the state has become the world's second-fastest growing logistics market.

8. OKLAHOMA CITY: SUITED FOR FUTURE GROWTH

Located at the intersection of I-35, I-40, and I-44, Oklahoma City is within one day's drive of the South Central region, particularly Arkansas, Louisiana, Oklahoma, and Texas, which has been developing steadily. It is also equidistant from the East and West Coasts, as all major trade hubs—along with more than 411 million residents—are located within 1,800 miles of the city.

Aside from its ideal location in the southern central United States, Oklahoma City has also been ranked as one of the nation's 10 most affordable cities by Forbes. Due to its affordability and location, the region's population will increase by nearly 45 percent over the next 25 years, projects the Greater Oklahoma City Chamber.

Such growth has already become evident in the area's logistics sector, as approximately 2,500 jobs, accounting for almost $850 million in payroll, were created between 2006 and 2015.

"Annual wages for the logistics sector currently average $46,693, which is about 7 percent higher than the overall Oklahoma City regional average wage," says Roy Williams, president and CEO of the Greater Oklahoma City Chamber. "The logistics sector also contributes more than $1.2 billion in gross regional product to the region's economy."

Currently, 17,800 logistics professionals are employed in the area; a majority of them work for couriers and express delivery services, general freight trucking, and general warehousing and storage organizations. Occupations vary from industrial truck and tractor operators to heavy and tractor-trailer truck drivers, who hold approximately one out of every three logistics sector jobs in the region.

"Due to its interstates, cost effectiveness, and rail connectivity—it is on the main north/south line of the BNSF Railway—Oklahoma City is suitable for assembly, manufacturing, staging, and transportation, as well as the base for a company's operations," Williams says.

9. SAVANNAH: INVESTING FOR THE FUTURE

Considered a "center of gravity for growth," Savannah, Ga., recently recorded a sharp rise in total container trade, which increased by 17 percent from 2014 to 2015, according to the Georgia Department of Economic Development's Center of Innovation for Logistics.

Not only have imports risen by 30 percent between 2011 and 2015, but exports have also grown during the same period, increasing by 21 percent, as the Port of Savannah became the nation's second-busiest container exporter, behind only the Port of Los Angeles.

Operated by the Georgia Ports Authority, the Port of Savannah is also the country's fourth-largest port. That's not surprising, as more than 70 percent of the U.S. population can be reached in a two-day drive. Currently renowned as the nation's fastest-reaching port, the Port of Savannah also boasts an average single move time of 33.8 minutes and a double move time of 55.8 minutes, according to the Savannah Economic Development Authority. It also offers instant access to I-16 and I-95, as well as Class I rail service via CSX and Norfolk Southern.

Consequently, the Port of Savannah recorded a balanced trade ratio of 51 percent exports and 49 percent imports in 2015. To continue its success, the Port of Savannah has plans to invest $1.4 billion in upgrades throughout the next 10 years.






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