Logistics firms’ love affair with Chicago still going strong

Logistics firms’ love affair with Chicago still going strong,ph1

Conventional wisdom holds that logistics firms not only want to be in Chicago, they need to be in Chicago. The area provides access to the nation’s third largest market as well as airports, highways and intermodal facilities that can help broaden their reach.

Right now, there are no indications of an imminent break up. The Chicago industrial and logistics market is simply too well established and integral to the overall national logistical infrastructure for 3PL firms to start taking a harder look at other suitors such as secondary markets in the Midwest.

“Even with the political and financial problems that Chicago faces, it is the only market where all six Class I rail providers meet,” said Adam Haefner, director of brokerage services at Darwin Realty. “That, coupled with expressway access, the intermodal yards and the population, ensure that warehousing companies are here to stay in the short and long term.”

For those in need of proof, just look at the rate of speculative warehouse development that continues to occur late in this cycle. Darwin recently helped Bridge Development Partners acquire a Bedford Park, Illinois property that they will develop into a new spec industrial facility—the first in the city in over a decade.

Bridge is currently demolishing the site, a former perfume manufacturing facility, and will construct a 219,267-square-foot, state-of-the-art distribution center to be called Bridge Point Bedford Park.

Bedford Park is an infill submarket, developed to virtual completion. With its proximity to Midway Airport, major interstates, the city of Chicago and a strong workforce, the area appeals to industrial users and investors alike.

“Development will continue in infill markets in the next year,” Haefner said. “That trend will continue into the long term if the economy remains strong. Many infill markets lack modern industrial product with the ceiling height, bay spacing and trailer parking required by manufacturing, logistics and warehousing companies.”

As locations become available, and assuming the economy plays along, we should expect more spec product to be developed on infill sites. However, as desirable as locations such as Bedford Park are, developing on an infill lot can be financially difficult. As this is one of the hottest real estate markets on the industrial side that we’ve seen in decades, property values in tight markets remain at a high level.

“The challenge is finding suitable sites where the numbers are going to make sense to buy a building, demolish a building and construct a new building,” said Haefner. “In order for property to be redeveloped, you need to buy it at the right price so that the investment is going to make sense after the other costs associated with demolition and construction are put in place and you need to be able to achieve the rents that allow you to make the returns that your investors require.”

Though their attraction to Chicago probably won’t flag, the future for logistics firms will likely look different. It’s quite probable that at some point soon we will witness an accelerated shift toward automation and other innovations as the labor-intensive industry grapples with historically low unemployment rates.

“It is inevitable that technology will continue to advance, and that firms will use technology to become more efficient,” said Haefner. “The shortage of truck drivers, electronic logging for truck drivers and low unemployment will continue to push firms toward solutions to those problems.”

Amidst all the talk about automation, AI-driven logistics and tech-forward startup 3PL firms, there are 50-year-old companies like Chicagoland Quad Cities Express which just renewed a lease for their 412,405-square-foot distribution compound in Bridgeview, Illinois. A specialty logistics firm, Chicagoland Quad Cities warehouses and handles product that requires special training and care, including food-grade and hazardous materials.

“While some logistics companies hire temporary workers to compliment a smaller permanent staff, Chicagoland’s average employee tenure is 14 years,” Haefner said. “Many workers have called Chicagoland their first and last employer over the 50 years that the company has been in business.”

The Chicago area’s greatest asset is access: access to a large consumer population, access to a national and international transportation infrastructure and access to a deep labor pool. For these reasons, logistics firms still love Chicago and likely will for years to come.

Source: https://www.rejournals.com/logistics-firms%E2%80%99-love-affair-with-chicago-still-going-strong-20190204


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