Industrial Real Estate Recovery and the Growth of Inland Distribution Ports

The Journal of Commerce posted an interesting story not long ago pertaining to the increasing momentum of inland ports:

“…after the deepest recession in decades, major U.S. shippers aren’t rushing to add distribution and warehousing space at the clusters of distribution centers around coastal seaports. Amid a slow and steady industrial real estate recovery, however, momentum appears to be accelerating at inland ports… It’s easy to see why. As transportation costs rise, more shippers are looking to locate their distribution centers closer to their end markets and reduce long-haul trucking costs by using intermodal rail.”

The article goes on to list markets such as Missouri and South Carolina as gaining attention from shippers, highlighting this as an increase in “opportunities in the distribution landscape for smaller nodes…”

What’s more, “the timing appears to be right for the second wave of inland ports…” But perhaps the second wave is powered by a different kind of company. While large, nationally based operations may well be able to locate one dozen or more new and enormous distribution centers around the nation specifically located for their customer base, that may not be a practical business model for a smaller firm looking to do the same. These smaller firms outnumber the big guys by hundreds to one, and for them, strategically located distribution ports – the inland ports – are the answer.

Enter northern Nevada. Reno has been long regarded as a strategic western area for overnight

distribution into the population centers of the eleven western states due to its unique logistical location. Its location on a primary east/west rail service with both an intersecting north/south U.S. highway and a main east/west interstate – and only a short hop from the busy West Coast seaport of Oakland – adds up to a location that can receive and deliver freight quickly and economically. Add in the advantage of friendly state business regulations and no business income or personal tax and Reno quickly rises to the top of the list for a western distribution location.

These features have drawn numerous internationally based real estate investment trusts to heavily locate their operations in Reno. The area has state-of-the-art warehousing locations and over 74,000,000 sf of mostly multi-tenant locations from which to choose. Most firms investigating the area come away quite impressed with the infrastructure, support industries, trained labor force and location options. In addition, our industrial real estate market is priced very competitively compared to adjacent out-of-state markets.

In 2013, Reno’s industrial market has experienced a record absorption of the vacant space, indicating that many distributors have realized that Reno is one of the first spots they look to when seeking to expand their operations and cut costs to serve the western United States. We have noticed this growth covers distributors that utilize small package, LTL and truckload freight shippers alike. This further points to the general benefit the area offers both overnight e-retail operations as well as those serving the bricks and mortar stores.

Northern Nevada’s strategic location has served it very well in the past decades and it appears well situated to continue to benefit from the inland port concepts that are emerging and thriving today.