November 15, 2011

Tim Thompson, executive vice president and managing director of HSA’s Industrial Services Division, authored an article for this month’s Benuzzi’s Industrial Guide describing the changing dynamic in business park leasing.

Today, the market dynamic has changed, as uncertainty about fluctuating fuel prices and direction of the economy have made these exurban sites less desirable than in the past. A business park on the outskirts of metropolitan Chicago may offer the lowest rent—but the location might increase the “last mile” cost to reach customers.

Manufacturers and logistics companies have always faced pressure to reduce operating expenses, but the risk of volatile energy costs is now being factored into logistics real estate decisions. Rail and intermodal transport have become less costly and financially risky than truck shipping alone. Users have become keenly aware that real estate, including rent, inventory and labor, may constitute a smaller percentage of operating costs than transportation.

Some companies are creating distribution networks that are made up of more and smaller distribution centers that are close to markets or to the next step in the transportation chain. Some are creating freight-pooling hubs, where product is bundled for distribution in full containers or truckloads rather than less efficient partial loads. Business parks in infill locations with easy access to multiple modes of transport, along with up-to-date features such as cross-docks and trans-loading configurations, offer the most appeal to users operating on a just-in-time basis to minimize inventory build-up.

The full article is available in this month’s Benuzzi’s Industrial Guide.

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