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Three Reasons Cincinnati Is Industrial Hot Spot of America

As a result of increased online shopping, 51 percent of global retailers now offer same-day shipping to available areas, and 65 percent plan to offer it within a year. Cincinnati is within a 10-hour truck drive of 54 percent of the U.S. population.

By Brian Leonard and Mark Volkman

Tides are changing throughout the U.S. as companies work to confront COVID-19 and its implications on the national supply chain. Changing consumer preferences are forcing businesses to reevaluate their current supply chain and diversify their sources of supply.

Since COVID-19, retailers across the country have experienced a 54 percent increase in online sales. This shows the value shoppers place on convenience and accessibility — the only missing factor from online shopping is the immediacy of a physical store. As a result, 51 percent of global retailers now offer same-day shipping to available areas, and 65 percent plan to offer same-day delivery services within a year.

Brian Leonard, JLL

These factors, combined with the expectations of a “next normal,” will require fulfillment centers to be positioned close to customers to ensure timely deliveries. And finding a well-equipped, centrally located space can be a challenge.

Luckily for investors, the Cincinnati market is emerging as a destination for warehouse and fulfillment centers.

Cincinnati is nationally recognized for its accessibility to major markets, talented workforce and plentiful intermodal properties. Because of these reasons, major retailers like Wayfair and Hayneedle are dominating the market, making larger footprints harder to come by. Here are the top three reasons Cincinnati will remain an industrial hot spot in a post-pandemic world.

Mark Volkman, JLL

1. Accessibility

Cincinnati’s accessibility is unmatched in the U.S. It was recently named part of the “Heart of E-commerce” corridor for its access to the East Coast and Midwest cities, placing it within a 10-hour truck drive of 54 percent of the U.S. population. The market is home to more than 250 million square feet of industrial space, with 8 million square feet under development, according to first-quarter 2020 data from JLL.

Investors will start to notice a trend of more regionalized micro fulfillment centers versus multi-state hubs. By focusing on developing micro fulfillment centers, companies can maintain more flexible and nimble supply chains.

So, as these organizations look to diversify their supply chains, you can expect to see a focus on domestic hubs that can accommodate a wide breadth of cities and suburbs. According to JLL’s research on mitigating supply chain risk, the golden rule of supply chain in a post-COVID-19 world is to avoid sourcing everything from one location or one company and to maintain alternative sources of supply.

Cincinnati’s proximity to much of the country’s population positions it as an ideal solution for those looking to diversify.

2. Infrastructure

To further mitigate supply chain risk, investors are looking for locations that provide multi-modal transportation options. Distribution solutions that are close to parcel hubs or intermodal rail terminals will lessen the concern of tightened trucking capacity or skyrocketing freight costs.

The lack of supply in our supply chain has become a main talking point in the board rooms across America. These supply chain shortcomings have highlighted weaknesses in the sourcing of products and how they are distributed to end users.

Luckily, there is an abundant supply of infrastructure in the Cincinnati market. With three intermodal terminals, Cincinnati is home to the most intermodal terminals in the state of Ohio — and Ohio has the second-most terminals in the country. With 8 million square feet of industrial space under construction, the city is poised for even more investor attention in the second half of 2020.

3. Skilled workforce

Lastly, another large draw to the Cincinnati region is its skilled and plentiful workforce. There are nearly 300,000 workers in the industrial and transportation services in Cincinnati. That, combined with an affordable cost of living, makes the city an opportune area to attract and retain top talent.

Thanks to the city’s job availability and livability ratings, Cincinnati continues to grow year after year. In terms of population, the city has grown by tens of thousands of people in the last decade. The city’s port on the Ohio River and its proximity to major markets further proves that transportation is an important industry, and nearly 10 Fortune 500 companies have headquarters in the city. Additionally, Cincinnati was named one of America’s Safest Cities by Forbes and recently ranked as one of the happiest cities in the country by WalletHub.

Looking ahead

Cincinnati’s 2020 construction pipeline is expected to remain active, with millions of square feet of speculative construction. As demand shifts toward the mid-size user who’s looking to diversify, experts note that construction in the Cincinnati market is following suit, with new building size ranges concentrated largely in the 200,000 to 300,000-square-foot range.

While the world recovers from a global pandemic, domestically, companies are diversifying their portfolios to safely meet demand and be prepared in case of another global disturbance. By investing domestically, companies will be able to best provide for American citizens, without relying on overseas warehouses.

Brian Leonard is a managing director and Mark Volkman is an executive vice president, both with JLL. This article originally appeared in the July 2020 issue of Heartland Real Estate Business magazine.

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