Industrial Real Estate is all land and buildings that house industrial activities, including production, manufacturing, assembly, warehousing, research, and distribution. Industrial real estate is a broad term that covers a variety of properties. Industrial real estate is a comprehensive subset of real estate that includes warehouses, manufacturers, factories, logistics, and distribution. Property used to create or manufacture goods and products, as well as logistics real estate that facilitates the movement and storage of products and goods, is referred to as industrial real estate.
One of the types of industrial real estate is warehouses and fulfillment centers. As online shopping gradually becomes an integral part of the economy, e-commerce has brought forth significant importance to logistics, serving the growing demands of the digital economy.
The location of a warehouse can directly affect the well-being of your business. Whether you’re looking to purchase or rent your own warehouse, the location that you choose can make or break your venture. Here are three reasons why location is king when choosing a warehouse.
Choosing the right warehouse location can make all the difference in how effective, efficient, and profitable a company is. Leasing or purchasing a warehouse is a major decision, and choosing the right location can significantly enhance a company’s ability to compete and effectively serve customers.
If you are unable to source a warehouse close to your primary mode of transportation or an intermodal hub, you’ll want to look for a location with access to major roadways for a more direct connection. If possible, look for a warehouse location that’s centrally located relative to customers, suppliers, and carriers.
Importance of location of Warehouses
- Proximity to Receiving
Simply put, the closer your warehouse is to the place where goods arrive, the sooner those goods can be processed, stored, and shipped out. If you receive products from overseas, warehouses close to piers and marine terminals will be able to receive those goods quickly. If, on the other hand, you utilize freight rail services, be sure to choose a warehouse close to rail terminals. Warehouses that are going to be receiving goods by road should be easily accessible from main shipping arteries.
- Proximity to customers
With two-day, next-day, and even same-day shipping becoming the norm for online retail giants like Amazon and Walmart, the shopping public is accustomed to receiving their goods quickly. If you expect your warehousing partner to ship goods to person, it is vital that they be as close as possible to the customers who are going to be buying your products. Having your warehouse close to your customers is an important business consideration, no matter who those customers are.
To visualize the ideal location for your warehouse, identify the geographic areas with high concentrations of your customers. The closer your warehouse is to those locations, the sooner your products will get to your customers. Ask potential warehouse partners about delivery zones, and be sure that the fastest delivery zones match where your clients are.
As you are likely well aware, every time that you need to move goods through space, it costs you money. A warehouse situated close to receiving centers, close to customers, and/or close to shipping partners can help to minimize these costs. Cutting down the frequency and distance that your products need to move can save you money in the long run over a less expensive but less ideally situated warehouse.
- Labor force
A warehouse situated close to a strong labor force is more likely to be able to meet your needs than a warehouse that is scrounging for staff. Long commutes can depress retention among warehouse staff, and high turnover in a warehouse can easily make for a higher error rate. Warehouses with access to a large labor force are more likely to be able to hire skilled workers, or workers who will benefit from quality training. If workers are scarce, warehouses may end up paying higher wages for lower quality workers, passing the cost and risk to you.
As informed investors, we should understand the risks associated with real estate investing and that there is no guarantee. Please do your due diligence.
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Why is the location of a warehouse important in industrial real estate?
The location of a warehouse in industrial real estate is crucial for several reasons. It impacts factors such as transportation costs, supply chain efficiency, accessibility to customers, and proximity to suppliers. Choosing the right location can result in cost savings, improved operational efficiency, and better customer service.
How does the proximity to suppliers and customers affect warehouse location?
Proximity to suppliers and customers plays a significant role in a warehouse location. Being close to suppliers reduces delivery time and transportation costs, ensuring a smooth supply chain. Similarly, a warehouse situated near customers enables faster and cost-effective distribution, ensuring timely delivery of goods and customer satisfaction.
What role does transportation infrastructure play in warehouse location selection?
Transportation infrastructure, including highways, ports, and airports, is essential for efficient logistics operations. Warehouses located near major transportation hubs enjoy benefits such as reduced transit times, improved connectivity, and easier movement of goods. Access to transportation infrastructure facilitates smooth supply chain management.
How does market demand and competition impact warehouse location selection?
Analyzing market demand and competition is crucial for choosing the right warehouse location. Understanding the demand for your products or services in a particular area helps identify potential customer bases. Additionally, studying the competition in the market allows you to assess the viability of a location and make informed decisions based on the competitive landscape.