|Title:||United States top 10 airports by cargo shipments value in dollars for 2008|
|Source:||Real Estate Issues|
Start of full article - but without data
Top XX Airports by Total Value in 2008
Airport Value ($ millions)
J. F. Kennedy, NY $XXX,XXX
Chicago, IL $XX,XXX
Los Angeles, CA $XX,XXX
San Francisco, CA $XX,XXX
New Orleans, LA $XX,XXX
Anchorage, AL $XX,XXX
Miami, FL $XX,XXX
Dallas/Ft. Worth, TX $XX,XXX
Atlanta, GA $XX,XXX
Cleveland, OH $XX,XXX
Source: U.S. Department of Commerce, U.S. Census Bureau, Foreign
Trade Division, 2009
THE MARKET FOR WAREHOUSE AND DISTRIBUTION CENTER (W/DC) space is the least discussed property type in the academic and professional literature. Yet the demand for W/DC space is important for developers and investors to understand. The underlying determinants of W/DC demand are complex, have changed over time and show signs of continued change in the future.
Both the theory of and the investigation into the determinants of W/DC space demand evolved from office and retail space demand models that focus on employment and population. Prior to 1990, W/DC demand was the poor cousin to the other commercial property market studies. From 1990-1995, W/DC analysis came into its own. This article presents a brief review of this "industrial" space literature that, heretofore, included W/DC space as an undifferentiated property type. It also expresses current thinking, hints at potential new developments that may cause the current models to come into question, and concludes with suggestions for further research into W/DC demand.
To set the stage for a discussion of the demand for W/DC space, it is important to realize that W/DC space consists of different forms of warehousing. The general definition of a warehouse is "a structure or room for storage for merchandise or commodities." (X) Also, "Warehouse applies to unrefrigerated or refrigerated buildings that are used to store goods, manufactured products, merchandise or raw materials." (X)
However, within the real estate industry, storage space is used for different purposes:
* Bulk: Containers or pallets enter the structure in one truck and are routed to two or more trucks for distribution to users of the products (cross docking of pallet loads);
* Fulfillment: Containers or pallets enter the structure, the pallets are disassembled and routed by individual parcel to other trucks for distribution to users of the product (cross docking of disassembled parcels from incoming pallets);
* Distribution: Individual items enter the structure and are routed by individual parcel to other trucks for distribution to users of the product;
* Intermodal: Shipments come to the facility by one transportation mode and depart via another. The transfer of containers from ship to truck or rail is an example of this activity. The transfer from rail to truck is another example.
A schematic of this article appears below:
W/DC DEMAND FACTORS
The foundation of the W/DC demand determinant literature was laid from 1990-1994. During this time, most of the academic studies took a broad perspective, researching "industrial" demand that includes W/DC but also other property types such as manufacturing (both heavy and light), R&D and general flex space. The important demand factors we extracted from these studies are as follows: (X)
* Physical factors such as structural attributes are important determinants of demand. Age, condition, ceiling heights, structure size, column span, number of dock doors, number of drive-in doors, sprinklers, building age, parking area, truck service area, presence of a railroad siding and presence of office space in the structure are important factors. (X), (X)
* Location variables such as access to thoroughfares and location in a city or metro area are important considerations in determining warehouse demand. (X)
* Factors that extend the scope beyond the physical characteristics of the structure include the revenue potential of the property, the per capita income of the market area, change in the population of the market area and access to major highways. (X)
* Demand for warehouse space is a function of physical features (size, percent of office space, ceiling height, dock doors, and age but not rail siding); financial factors (industrial cap rate and prime rate but not an index of local economic activity); location (county and distance to airport); and type of tenant (single or multi-tenant). (X)
* Demand for warehouse space is a function of the labor force and the population of the economy, public infrastructure and services, and international issues such as currency exchange rates and trade barriers/restrictions. Transportation is of particular note since it is the one factor most aligned with the demand for warehouse space. The author contends this to be the case when transportation access including highways, rail and deep water are advantages of a region. (X)
* Demand for W/DC space increases as firms relocate their operations from cheap office space (Class B and C space) to W/DC space in business and industrial parks typically in the suburbs. (XX)
* Demand decreases as firms get better at managing inventories with modern computer systems and inventory handling equipment. (XX)
* Increased warehouse technology (in the form of racking systems and forklifts) reduce demand for warehouse space property. (XX)
* Industrial property demand (like other asset classes) is affected by lags related to the desire of organizations to purchase and deploy new capital and also in the risk mitigation approach of taking up only a portion of new capital in each of several successive years or investment periods.
* Warehouse employment is a cleaner proxy for warehouse demand as this figure tracks inventory levels very closely. (XX)
* Changes in output (or employment) and movements in the after-tax cost of corporate capital are associated with industry property completions. (XX)
* Increases in manufacturing output that result primarily from technological improvements and capital intensification rather than increased employment affect industrial space demand. (XX)
* Considering employment as the major driver of commercial real estate demand, the author introduces economic development factors into the analysis. These additional factors are the employment growth rate, the instability of employment, the industry mix (the industrial structure of the local economy as revealed in one-digit SIC codes), a measure of industrial diversity (as measured by the Theil Entropy Index), educational attainment, percentage of young firms (five years old or less) and the percent of locally owned firms. (XX)
* Location, even small geographic differences in location, can affect demand for warehouse facilities. Also, the land-to-building ratio can affect demand. (XX)
* Replacement demand due to functional and locational (external) obsolescence of existing facilities affects total demand for new W/DC space. (XX) Properties suffering from obsolescence face a declining demand.
* Focusing on the price per square foot of industrial properties as the dependent variable, price per square foot in earlier periods, recent construction, a "monetary base" (undefined in the article) and a variable created as the difference between the long-term Treasury bond and the Moody's Baa corporate bond rate. (XX)
* The "path of goods movement" (POGM) theory proposes that land for warehouses gravitates to transportation corridors and hubs with favorable access to seaports, rail, air and truck transportation between major import sites and consumption centers throughout the nation. Figure X displays a map of the U.S. with the major highway transport routes. Rather than locating warehouses near the large manufacturing centers as had been the custom in past development cycles, warehouse space demand will more closely follow population centers where manufacturers and importers can position their product for quick consolidation, packing and distribution to the key retail and consumption markets in large population centers. Markets on this path of goods movement will see more warehouse space than other markets controlling for industrial and manufacturing activity. (XX) Summarizing the 1990-XX literature research into W/DC demand identified a wide array of substantive variables. They included physical attributes of the site and the structure; locational characteristics; inventory management techniques such as Justin-Time inventory (JIT); technological improvements in W/DC equipment; the price of capital goods (W/DC space and equipment); the cost of capital; replacement demand due to functional and locational obsolescence; economies of scale; path of goods movement; and industrial employment level changes.
[FIGURE X OMITTED]
CRITICISM OF INDUSTRIAL EMPLOYMENT-BASED MODELS
Starting in 1997 the "industrial space" demand literature branched in two directions from the 1990-XX literature. The first was the criticism of industrial employment-based demand models. The basic element of this criticism contends that the industrial space demand model and the analysis of the industrial space market are not variants of the office demand model and market analysis. (XX) The determining factor in office demand models is employment with a more specific definition of office-based employment across SIC codes (NAICS codes today). (XX) Some office studies used total employment in SIC codes that had a high percentage of office-based employment such as the finance, insurance and real estate SIC code (FIRE) and the services code.
The task of estimating office-based employment is difficult, but estimating "warehouse-based employment" is even more difficult. Manufacturing, wholesale and transportation sector employment are not easily segmented into employment in W/DC facilities. The manufacturing sector includes employment in both production and warehousing facilities, very often without specific distinction Many workers in wholesale and transportation do not work in W/DC facilities. Many workers in the retail industry are W/DC employees but counted as retail workers; consider the big box retailers that use W/DC type facilities with high ceilings for their retail stores and use the upper racks for storage. (XX)
"The demand for warehouse space originates more from the volume of inventories stored, rather than from the workers used to move this material around. (XX) The volume of freight shipments was used as a proxy for warehouse inventory. (XX)
SUPPORT FOR THE ORIGINAL DISCOVERIES