Consumer behavior shifts towards more e-commerce, increased industrial production and increased imports are all driving tremendous growth in the logistics, distribution, and fulfillment center industry in the United States. Today’s fulfillment centers are replacing job losses in the manufacturing industry as a result of automation driven by technological advances and lower costs of AI and robotics. In fact, demand for logistics space drove down industrial real estate space in the United States to 4.3% in 2018, a new historic low. There are three distinct strategies for capitalizing on the logistics boom.
First, create sites. Communities have been developing industrial parks for decades, hoping that “if you build it, they will come.” The difference is the capital markets are interested in capitalizing on the logistics boom as well and national industrial developers are building industrial centers, often with million-square-foot buildings designed for modern logistics centers, as fast as they can. Communities that want to attract these industrial developers must provide a smooth land use process, competitive tax rates or abatements, tools for funding schools and local governments, and the infrastructure needed to improve the regional transportation system.
This capital market interest in developing logistics space suggests that communities should avoid constructing their own speculative space. Instead, administer your land; these industrial parks, frequently found in rural areas, may range between 100 and 1000 acres in size. To prepare the site for development, you must first understand the costs of construction, transportation, and infrastructure. Zoning for the logistics industry is frequently created specifically, and a public-private partnership is formed to eliminate the property tax while capitalizing on other taxes such as income or sales to build a revenue stream for local governments and school districts.
Second, construct infrastructure. Logistics parks do not exist unless they have access to roads, rail, airports, water, and sewage systems. The fewer logistical challenges there are, the better for communities hoping to benefit from the logistics boom. 49 states have Tax Increment Financing (TIF) programmes that use the future growth or increment of property taxes, as well as potentially other taxes, generated by development to fund the infrastructure required for the development. States that levy income taxes frequently have programmes known as Joint Economic Development Districts, which allow townships to pool income taxes generated by economic development projects to fund public infrastructure.
The Infrastructure for the logistics industry is not only found in industrial parks. A logistics park operation is frequently centered on interstate highway access, major rail links, and logistics-based airports. Many successful logistics centers develop an intermodal, which is defined as the movement of containerized (unitized) cargo by air, land, or sea using various transport modes capable of handling containers (aircraft, trucks, rail, boats, ships, barges, and so on). Intermodals are typically centered on railroads.
The workforce is the third, but far from least, consideration. Without a trained workforce that is well-prepared and readily available, logistics parks cannot succeed. According to a DHL-funded study, jobs in logistics are expected to grow by 26 per cent between 2010 and 2020, while one global study estimates that demand for supply chain professionals outnumbers supply by a factor of six and that some studies claim that 25 to 33 per cent of the current supply chain workforce is at or beyond retirement age, and the backfill pipeline is insufficient to meet replenishment demand.
The logistics Industry is not the only one facing workforce development issues. Full employment, as well as a demographic shift with Baby Boomers retiring and Millennials struggling to fill this significant workforce gap, create a workforce skills gap in nearly every occupation. Regional workforce development programmes are on high alert to address this economic challenge, but it may take more than a village to solve this problem. Regions that want to capitalize on the growth of the logistics industry must develop customized workforce development programmes for this industry.
Communities such as Kansas City have benefited from logistics for decades, thanks to a significant BNSF rail investment. Just southwest of Kansas City’s downtown is Logistics Park Kansas City (LPKC), a 1,700-acre master-planned distribution and warehouse development. LPKC is a world-class inland port with a capacity of 17 million square feet, served by global intermodal transportation leader BNSF Railway. There are 7+ million square feet of new distribution facilities at LPKC, with speculative and build-to-suit opportunities available. NorthPoint Development is the LPKC developer, and they have driven unprecedented industrial growth in the Kansas City region, delivering 5.1 million square feet of new industrial space in 2018 – with another 4.2 million square feet under construction.
The location Many large global brands, including Amazon, Dollar Tree, CVS Health, Overstock.com, Turn5 and Hy-Vee Aisles, are now accommodating relocations or expansions. With a 3.5% growth rate in transportation and warehouse employment for nearly a decade and 10 new freight-based companies bringing nearly 1,000 jobs to the region, it’s clear that Kansas City is becoming a key business destination for many logistics managers. Profiting from a strategic location, rail infrastructure, and a skilled industrial developer is a winning combination. A logistics workforce development programme is also available to LPKC.
The Logistics Park Kansas City (LPKC) Learning & Career Center (LCC) Is a collaborative effort between private industry, educational institutions, community, and workforce partners aimed at developing a highly skilled workforce for the logistics and supply chain industries in and around LPKC. The LCC works hard to develop training programmes that produce excellent employees and to provide employment services to job seekers and businesses in the LPKC Business Park and the surrounding Southwest Johnson County, Kansas area. Finally, the Kansas City Area Development Council, a strong regional economic development group, promotes the park and regional economic development. LPKC is the complete logistics park package, and it is expected to create 13,000 new jobs in the coming years.