Dayton Manufacturing & Logistics Summit
What is your current assessment of the Dayton industrial market? How healthy is the Industrial real estate industry and how is it changing?
The industrial market continues to show signs of strong fundamentals. Market changes are driven largely by infill and regional bulk distribution, as the retail environment yields from ground to online buying, and the continued growth in the advanced manufacturing and automotive sectors.
Our local industrial markets are led by more core industries like automotive parts and products, advanced manufacturing, food & beverage, consumer goods, chemicals, and machinery while distribution is being driven by changes in e-commerce.
Companies like Pratt Industries, Staco, Spectrum, Amazon, Silfex Inc., and Emerson Climate Technologies have made large investments in the region in recent years.
Further, we see continued increased interest from both domestic and international companies, including active interest from Canadian companies that are looking at lower tax options.
The Dayton Industrial market continues to expand with the growth of home-grown companies as the vacancy rates in the industrial market have dropped to 5.5%, the lowest rate in over a decade. With the growing demand for existing buildings and the limited supply, many users are finding fewer options, especially with higher quality buildings. Further, as the market tightens, we have seen increases in both sales prices and rents. This will most likely lead to more new construction and expansion options as companies feel more confident in the economy and willingness to invest in future growth.
Still, developers remain cautious on speculative development and are taking a more deliberate approach to preparing for opportunities as they are presented in the region. The most active developer regarding speculative space within the region has been Kansas City-based Northpoint Development, which has developed over 3.0 million square feet in the region.
How is e-commerce impacting the market?
As mentioned, the industrial market expansion has been driven by the expansion of regional bulk distribution as the retail environment yields from ground to online buying as goods consumptions have grown by more than 5% in retail sales. The change in the way consumers are shopping and receiving merchandise has dramatically shifted from the in-store model to the online model.
Primarily driven by large drivers, Amazon and Walmart, now 3rd party logistics companies (3PL’s), are signing a majority of leases and playing a significant role in new development.
Retail is undergoing a huge change with its omnichannel approach to sales and how those sales are delivered.
Traditional department stores are in decline due to e-commerce and stores wanting to carry less inventory. Macy’s, Sears and JC Penny have closed facilities across the country with a focus on more internet sales and direct delivery to customers. Smaller storefronts lead to expanding warehouse needs.
The new trend is the Last Mile distribution platform, which is the last leg to get goods and services directly to the consumer. Companies and developers are working with communities to identify warehouse options to service this growing sector, which is primarily found in urban and suburban areas. The form of this warehouse is taking unique shapes and design as the traditional warehouse is limited. We are finding the need for infill sites for “ground up vertical warehouse” or adaptive re-use conversions to warehousing. We have seen this recently occur with Amazon leasing space within the Kettering Business Park (the former DESC facility).
What are industrial manufacturers and logistics companies looking for in a location and facility? What type of product are industrial users looking for? What are the key factors driving decision markers?
- Proximity to major markets – where are the people?
- Proximity to airports
- Proximity to rail
- Proximity to waterways including major ports and internal waterways like the Ohio River
- Proximity to major manufacturers and industries like the major auto producers; Honda, Toyota, etc.
- Evolving facility needs include Higher Ceilings in manufacturing and warehouse / Strategic Shipping & Receiving needs; water supply.
What opportunities does Dayton present to users? Why is the Dayton Region a good place to move a company? What are the key factors driving decision markers?
The Midwest, Ohio and the Greater Dayton region remains is well positioned regarding four critical factors for companies: Proximity, Connectivity, Property Costs, and Labor.
Proximity: Geographically, the region’s proximity to major markets puts it within a one day’s drive of 60 percent of the U.S. and Canadian population and within a one day’s drive of 70% of the nation’s manufacturing capacity.
Connectivity: Companies need to know how easily they can get their supplies in and their goods and services out to market. Our region’s lack of congestion compared to the country’s eastern corridor makes ease of movement a big plus. Dayton’s “good bones”—its excellent inter-modal connectivity—make it one of the most accessible cities in the nation:
- To major markets: Sitting at the crossroads of Interstates 70 and 75, five interstates serve our region
- To railways: The region hosts the 4th highest rail freight traffic in the country
- To airports: Five international airports are within a two-hour radius as well as some of the world’s largest public and private airports dedicated solely to cargo shipment
- To waterways: 25 ports and terminals are within a 12-hour drive, with the Ohio River just an hour away
Property Costs: Compared to other areas of the country, what will real estate cost to rent, buy or build in the Greater Dayton area?
- Acquisition prices and rental rates are below most competing markets
- Land is plentiful and reasonably priced
- Costs of construction rank below the national average of similar markets
Labor: Greater Dayton is attracting companies in search of a community offering a high-quality work/life balance. Business-friendly and culturally diverse, for employers and their employees, this is an “easy place for companies to land”:
- Our lower cost of living (housing, food, healthcare, taxes), especially compared to the coasts, make this region one of the lowest cost business locations in the United States
- Because of this, our cost of labor is at or below national averages
- We have a high concentration of quality public and private high schools, colleges and universities focused on educating students for emerging industry needs
- And our labor force includes a higher blue collar-employment concentration than the U.S. average
Can you provide an example of companies that have utilized this Winning Formula? What are some recent notable deals and why did they occur?
Dayton is home to many manufacturers and suppliers in the advanced manufacturing, automotive industry; aerospace, distribution of wholesale goods; and manufacturers of bioscience, pharmaceuticals and medical equipment, power quality, and voltage control technologies and semiconductor components industries.
When applied to our region’s offerings, the Proximity + Connectivity + Property Costs + Labor formula continues to attract multiple new U.S. and international companies to Greater Dayton— Pratt Industries, Fuyao Glass Industry Group, Topre Corporation, NuVasive Inc., Excelitas, Victory Wholesale Group, Spectrum Brands, Staco Energy Products Company, Silfex Inc. and MidMark Corporation among them.
New business is the lifeblood of Greater Dayton. For our common good, we are a community in which government, businesses, and citizens work together to nurture a healthy work/life environment, one that has created the kind of institutionalized flexibility that adapts to evolving market needs. And that bodes well for our future.
What areas are the most active in Industrial growth in the region? What are the trending locations for the Warehouse and Industrial markets? Which Dayton sub-market(s) will be the most attractive to users and why?
The northern Dayton regional market along Interstate 70 and 75 has been one of the most active areas in recent years for industrial manufacturing and logistics growth. Centered near the Dayton International airport, this market has added millions of square footage in rent years.
We have also seen significant growth in both Warren and Butler Counties, along with and near Interstate 75 between Dayton and Cincinnati.
All of these areas take advantage of the ease of accessibility to the major interstates and major employment markets. These markets also make available reasonably priced land for development and communities that are eager to attract growth.