A new corporate site selection study names Fresno one of the most “logistics-friendly” cities in the U.S.
Compiled by the Princeton, N.J.-based Boyd Company, the report compares the cost of operating a 500,000-square-foot, 200-employee distribution warehouse for a year in 25 U.S. cities.
With an annual average operating cost of $15.87 million, Fresno ranked as the third-most cost-effective market in California.
Ontario came in second at $15.8 million and Bakersfield, which had an annual operating cost of $15.64 million, ranked first — least expensive — among Golden State cities.
At $21.8 million, Chicago was the U.S. city with the highest annual warehouse operating costs, according to the report.
Mesquite, Nevada, had the lowest annual operating cost at $13.6 million.
The study, compiled over the past quarter, factored in the major geographical variables critical to the corporate site selection process including labor, real estate, construction, taxes, utilities and shipping.
“Despite high costs and a difficult business climate, the distribution warehousing industry is soaring in California,” said the study’s author, John Boyd, one of the country’s leading corporate site location consultants.
The 25 cities included in his most recent report “are the most popular cities our clients are asking us to look at right now,” he added.
Local real estate professionals cheered the findings.
“We haven’t seen a market this strong since the recession started,” said Nicholas Audino, senior vice president at Newmark Grubb. “Vacancies around the Valley are almost zero for large Class A distribution space.”
In his report, Boyd said California, because of rapidly evolving supply chain trends, is currently in the warehouse and distribution sweet spot.
“The sheer size and wealth of the California consumer market makes it imperative for big box and ecommerce retailers like Walmart, Target, Costco, Kohl’s, QVC and Amazon to maintain major distribution facilities in the state,” he said.
The recently enacted Food Safety and Modernization Act is also having a significant impact on where companies are locating, Boyd added.
“The Act has made a lot of existing warehouses antiquated,” he said, adding that many companies are deciding to utilize greenfield areas around major distribution hubs to build new facilities rather than retrofitting, older existing warehouses.
So-called “last mile” site selection trends, led largely by Seattle-based Amazon, are prompting companies to locate distribution centers as close to major U.S. population centers like Los Angeles and San Francisco as possible, Boyd noted in his report.
Imports from China are also a major driver behind the surge in California distribution warehouse projects. “Forty percent of all goods entering the U.S. pass through the Ports of Los Angeles and Long Beach,” Boyd said.
“It used to be that many cities in California were resistant to new warehousing projects and viewed them with a degree of skepticism,” he added. “Now, cities are viewing distribution centers as much better employers and actively courting these same projects because the economic benefits are becoming much more appreciated.”
Boyd said large warehouse operations often translate into huge property tax windfalls for cities, along with other “coveted revenue streams like sales taxes, personal property taxes, utility taxes, fuel taxes, telecommunications taxes and personal and corporate taxes.”
And whereas in years past, lower-skilled workers dominated the typical warehouse labor force, Boyd said that today’s highly automated and computer-driven distribution centers employ “well-compensated white-collar workers who manage sophisticated technologies.”
California warehouse activity is poised to benefit from growing export trade with China and Southeast Asia, where a booming middle class has a “growing appetite for U.S. branded products, especially fresh and frozen American food and agricultural products,” Boyd said. “Fresno’s proximity to California’s huge Central Valley food processing industry and ag sector fits well with this trend.”