The U.S. distribution markets taking on the big players

Article by JLL Staff Reporter

If the U.S. industrial real estate market was a golf course, the front nine would include the “usual suspects” – distribution center markets like New Jersey, Chicago and Los Angeles – known for their access to large population centers and transportation infrastructure.

Some or all of the front nine markets are a standard part of nearly all national supply chain distribution networks and are so in-demand that corporate occupiers, e-commerce companies, and global investors and developers are looking beyond these major markets for new opportunities and deals. As a result, some less well-known secondary markets offer unique advantages for distributors and developers. In golf, we might call these markets the “back nine.” They may not be the first play, but their performance can determine the winner.

“As consumers get more and more used to the convenience of on-line shopping and demand for faster and cheaper delivery continues to escalate, companies will be required to have more facilities closer to their customers,” says Rich Thompson, Global Head of Supply Chain & Logistics Solutions at JLL. “This will require logistics companies to look more to the ‘back nine’ markets for the answer.”

View the slideshow to see where global investors are heading next in the ‘back nine’ U.S. distribution markets.

Honky-tonks on Lower Broadway. The district is famous for the numerous country music entertainment establishments. industrial

The Honkey Tonk Triangle (Louisville, Memphis, and Nashville)

The Honkey Tonk Triangle markets offer attractive labor, affordable real estate costs and available land with development potential. Home to FedEx’s global “SuperHub” and five Class One rail lines, Memphis has become a vital U.S. logistics node. Nashville has favorable transportation and manufacturing locations within a one-day drive to essential front-nine hubs like Chicago and Atlanta. Louisville offers ample proximity to the greater Midwest, Great Lakes and population centers throughout the central U.S.

Honky-tonks on Lower Broadway. The district is famous for the numerous country music entertainment establishments. industrial
Charleston, South Carolina, USA town skyline. industrial

The Carolinas

Connectivity and affordable labor costs are the big pluses of the Carolinas. The region is a hole-in-one for its reasonable cost of living and access to production locations, as well as to the interstate network, rail, seaport connections, and proximity along the eastern seaboard to other major population centers. Furthermore, forecasted per capita growth in Charlotte and Greensboro-Winston-Salem over the next few years is on pace with many ‘front nine’ markets.

Charleston, South Carolina, USA town skyline. industrial
Northern California and Reno industrial

Florida

Top Florida markets are connected through robust transportation and infrastructure networks. Affordable labor costs, low unionization and plenty of workers in the region support its ‘back nine’ position.

Northern California and Reno industrial
MINNEAPOLIS - APRIL 21: Target Field, the new outdoor stadium of the Minnesota Twins, with skyscrapers towering in the background, industrial

Minneapolis and Milwaukee

Minneapolis may be a surprise in the back nine, but it benefits from an affordable cost of living and an affluent core of residents along with a population which is similar in size to many other back nine metropolitan areas. While it may also lack some of the infrastructure needed for logistics connectivity, Minneapolis serves its regional economy well with its blue-collar civilian labor force. Its drawback: higher wages and real estate costs compared to some other back-nine markets. Milwaukee is an attractive satellite market for Chicago and, while its labor costs are a little higher than Chicago’s, a few Class A space options are still available in its tight industrial real estate market.

MINNEAPOLIS - APRIL 21: Target Field, the new outdoor stadium of the Minnesota Twins, with skyscrapers towering in the background, industrial
St. Louis downtown  at twilight, industrial

The Heartland (Kansas City, St. Louis)

Within The Heartland, Kansas City has a sizeable industrial real estate base and acts as the “link” for cross-border rail activity to Mexico and interchanges with Canada. St Louis, meanwhile, offers easy access to the concentric rings of the Midwest consumer base, along with affordable tracts of buildable land and rental rates close to the U.S. median.

St. Louis downtown  at twilight, industrial
Florida industrial aerial view of miami's brickell avenue skyline and rickenbacker causeway bridge on clear, sunny morning; Shutterstock ID 380919226; Departmental Cost Code : redownload; Project Code: redownload; PO Number: redownload; Other: redownload

Northern California & Reno

Home to a huge number of people in the West half of the U.S., the Northern California and Reno region is spread out over a vast interstate network connecting many of the local markets with other major metro areas. Many Silicon Valley tech companies like having their manufacturing and inventory close at hand, which bolsters the industrial market despite high land prices. Oakland, a key player in the region, has a large local base of residents and consumers—but also a higher-than-average cost of living and warehouse labor costs. Sacramento, North Bay and Reno offer up a little more flexibility when it comes to site selection along with lower real estate and labor costs.

Florida industrial aerial view of miami's brickell avenue skyline and rickenbacker causeway bridge on clear, sunny morning; Shutterstock ID 380919226; Departmental Cost Code : redownload; Project Code: redownload; PO Number: redownload; Other: redownload
Las Vegas skyline industrial

The Desert (Las Vegas, Phoenix)

The cities of Phoenix and Las Vegas offer ample available labor and favorable pricing. While vacancy rates are higher than many other markets around the country, the Desert markets are still stable and rents are on the rise.

Las Vegas skyline industrial
Downtown Salt Lake City skyline Utah in USA industrial

The Mountain Region (Denver, Salt Lake City)

The Mountain Region offers landlord-friendly rents and available land for business and industry, but has limited options for “big box” development. Therefore, its cities tend to serve as regional distribution hubs. Denver has experienced growth in a tightening market, where development has not been extremely strong in the last 18 months. Both Denver and Salt Lake City have populations similar to that of Ohio and the Carolinas, but are located much farther away from the major ‘front nine’ markets.   

Downtown Salt Lake City skyline Utah in USA industrial
Sunrise View of Portland, Oregon from Pittock Mansion. industrial

The Pacific Northwest

With a strong container port network between Seattle and Tacoma, coupled with important rail connections, the Pacific Northwest region can serve the population centers in and around Seattle and Portland but it can also help move cargo to the center of the country. Although population growth is booming in the region, there are diminishing returns as customers are more spread out. It also has a higher cost of living and higher warehouse labor costs than other regions.

Sunrise View of Portland, Oregon from Pittock Mansion. industrial
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