Current State of the Overall Industrial Market - Part 1 (Ean Johnson - OmniTRAX)

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Despite lingering economic uncertainty in 2023, the market for industrial development projects remains quite strong. Although OmniTRAX sees fewer total industrial projects across the U.S., the sizes of the projects are often much bigger than past projects, and the role of logistics efficiency for new projects has become a critical component in the site selection process.

The electric vehicle industry is a great example of large, multi-faceted projects with complex logistics requirements. Competition between states and communities for these types of projects is high, and logistics is a critical component. In fact, JLL’s Supply Chain Consulting Practice notes that 80% of operating costs are in logistics (freight, labor, and inventory). In this climate of larger and fewer developments, rail can play a significant role and should be a key criterion for site selectors, economic development organizations, and communities when evaluating property.

With that in mind, successful industrial development will continue to hinge on available product. Here product is defined as the right land parcel, in the right location, with the right utilities, the right zoning, and the right transportation access – including rail options. In 2023, available product is more challenging to find and there is simply no industrial development project without available product. Accordingly, site selection consultants and end users of industrial sites are having to get more creative and more accepting of sites that aren’t exactly “right” in all the categories noted above.

However, while creativity within certain site development criteria can expand potential options, rail-served product must be viewed differently. It’s imperative that developers work hand-in-hand with their rail service providers to ensure communities and local economic development organizations are protecting sites adjacent to rail lines for projects that can benefit from rail-served real estate solutions. Much like limited port space, land adjacent to rail lines is finite and should be viewed extremely carefully to not be exhausted for non-rail development. With logistics consuming such a large share of total operating costs and the increasing size of potential new industrial projects, the availability of rail-served and rail-capable sites will play a very important role in the projects ahead. 



In Part 2 of this two-part series, we’ll discuss how the drive for sustainability is changing the industrial development landscape and how rail can be the at the forefront of this transformation.