Strategic Location, Strong Labor Force Boost Columbus Industrial Market
The Columbus industrial market continues to thrive as a hot center for logistics, warehousing and manufacturing. Its strategic location within a one-day truck drive of 50 percent of the U.S. population and one-third of the Canadian population is an important part of this success.
Other contributing factors to this success include a strong Midwestern work ethic, low cost of real estate, low taxes, low wages and minimal union activity. With a total population of about 2 million in metro Columbus, central Ohio has 86,000 employees in the manufacturing industry and 80,000 employees in logistics at 4,100 logistics companies.
Positive vital signs
Central Ohio’s 273-million-square-foot industrial real estate market continues to expand with nearly 5.7 million square feet of new construction in 2017. Year to date, there has been 1.3 million square feet of positive net absorption and vacancy is 4.6 percent, down from 5.1 percent as of year-end 2016. Net absorption totaled 9 million square feet in 2016.
Effective rental rates in central Ohio range from $2 to $3.75 per square foot net for larger warehouse and manufacturing spaces. Operating expenses run from 35 cents to $1.25 per square foot. Sales prices will range from $10 to $45 per square foot for vacant owner-user buildings and can sell for as much as $91 per square foot for a warehouse that is leased for the long term.
The local economic development organization Columbus 2020 has been highly effective at attracting new companies as well as retaining and expanding existing companies in central Ohio. The organization has set a goal of creating 150,000 net new jobs by 2020. So far, 141,178 net new jobs have been created and $8.1 billion has been invested in the area, attracting companies such as BrewDog Brewery, Facebook, Amazon and Niagara Water.
One of the largest projects recently announced is a new 1.6 million-square-foot paper mill and tissue plant for Sofidel, an Italian-based producer of tissue paper for sanitary and domestic use. Gray Construction was selected to design and build the facility. Currently under construction, the building is expected to employ approximately 300 people when it opens in 2018.
Columbus has one of the lowest overall costs to operate a distribution or manufacturing facility. For manufacturing, when factoring in total payroll, real estate costs and taxes, Columbus ranks first at only 8.4 percent of revenue versus other cities such as Detroit (9.7 percent), Indianapolis (9.9 percent) and Dallas (10.6 percent).
For distribution (logistics), Columbus also ranks first with these same costs totaling 6.4 percent of revenue versus Dallas (7.3 percent), Indianapolis (7.9 percent) and Chicago (8 percent).
Central Ohio has the second-lowest effective tax rate in the country for distribution facilities, and one of the lowest costs for facilities in terms of rent or purchase prices, according to Columbus 2020.
Columbus offers coast-to-coast rail service by CSX and Norfolk Southern, as well as shipping and air access, including an airport focused on freight with direct flights to Asia and shipping directly from Asia through its inland port. The inland port has a direct connection to the Port of Virginia with the ability to ship double-stacked containers and clear customs in Columbus, instead of the coast, which saves time and money.
It also has four intermodal facilities that handle over 800,000 container lifts annually. Central Ohio has 450 international firms, and one of the top 10 foreign trade zones in the United States.
Magnet for 3PLs
For these reasons, third-party logistics companies have chosen central Ohio to establish significant operations, including fashion logistics provider Bleckmann.
Johan Milliau, CEO of Bleckmann, had this to say about Columbus: “As a 3PL company focused on fashion and e-commerce, it is key for us to be in a location with good infrastructure, a good labor base and a central location. After a detailed analysis, we concluded that Columbus was the ideal location to serve the United States from the East to the West Coast.” Belgium-based Bleckmann moved its U.S. headquarters to Columbus in 2016. The 262,000-square-foot facility employs 200 people.
Columbus has also become a destination for many data centers due to its central location, which reduces latency and provides access to reasonably priced power, extensive fiber infrastructure and a skilled and educated high-tech labor force.
With nearly 150,000 college students in the central Ohio area, employers have access to a good source of new employees. Some of the new or expanded data centers in Columbus include Facebook, Amazon.com, Discover Card, TJX Companies and Verizon Wireless.
— By Brad Kitchen, SIOR, President, Alterra Real Estate Advisors. This article first appeared in the October 2017 issue of Heartland Real Estate Business magazine.