The Atlanta Journal-Constitution
Distribution replaces manufacturing hubs
Developers modify industrial sights for online sales.
‘Logistics and fulfillment is really the segment of the industrial world that has backfilled the void that manufacturing has left in terms of employment and economic activity.’ Thomas J. Hanna President of Harvey Hanna & Associates
As the U.S. economy continues its shift away from manufacturing, locations that once housed industries such as automobiles or chemicals are being remade as distribution hubs for the millions of items bought by consumers online.
Developers are trying to meet growing demand by modifying industrial buildings to meet the requirements of the logistics business or, more likely, demolishing them to make way for facilities built for the distribution industry. These sites offer many benefits ideal for distribution, including easy access to highways, ports and rail links and a proximity to major markets.
“Logistics and fulfillment is really the segment of the industrial world that has backfilled the void that manufacturing has left in terms of employment and economic activity,” said Thomas J. Hanna, president of Harvey Hanna & Associates, which plans to tear down a former General
Motors assembly plant at Newport, Delaware, to create a 3 million-square-foot complex for distribution companies.
Plans are in place to redevelop other former manufacturing sites across the nation, including a former plastics factory in Piscataway, New Jersey, and an old Ford plant in Lorain, Ohio.
E-commerce is driving strong growth in demand for industrial sites, according to a report from Newmark Knight Frank, a global commercial real estate company. “As consumers across economic and demographic spectrums continue to demand more rapid product delivery, developers have had to innovate their product and offer more highly efficient space in the largest urban markets,” the report said.
In coming weeks, crews in Delaware will begin to raze GM’s giant Boxwood Road factory, which was built in 1945 and once employed as many as 8,000 people but has been empty since the automaker’s bankruptcy in 2009. A $250 million project will replace it with four dividable buildings designed for the logistics industry, including a 40-foot-high ceiling and 600 feet between truck entry and exit points.
Fisker Automotive had planned to revive the plant by making luxury cars there before it went bankrupt in 2013, and demolition was not the first option for Hanna, a
Newport native with ties to the 142-acre site. His father worked there as a plant engi- neer, and his uncle, who is now his business partner, had summer jobs mowing lawns as a teenager.
Hanna wanted to reconfigure the factory for today’s manufacturers, but after a year of trying, he was unable to generate enough inter- est. He concluded that the costs of manufacturing in the United States, especially the Northeast, were too high to find enough tenants to fill the plant’s 1.1 million square feet.
“Manufac turing is not entirely dead, but it’s nowhere near as robust as it once was in terms of our economy,” Hanna said during a tour of the building.
Despite a rebound from the depth of the recession, the United States has lost about 640,000 manufacturing jobs during the past decade, with data show- ing 12.7 million in August, according to the Bureau of Labor Statistics.
Within an eight-hour drive of some 50 million inhabi- tants in the Northeast and mid-Atlantic, and close to highways, rail and the soonto-be upgraded Port of Wilm- ington, the site is well situated for the logistics industry.
“This plant has sat dormant for almost a decade, and it is time for it to be put back into a higher and better use,” Hanna said.
Developers of older industrial sites face risks, including the cost of demolition or refurbishment, environmental cleanup and the need to retain a local workforce that can transfer its skills to logistics, said Robert J. Vodinelic, the national practice leader for industrial and logistics real estate at Newmark Knight Frank.
But many are willing to take them on because of the strong demand from the logistics industry, Vod- inelic said.
“If they are able to buy these properties for a frac- tion of the replacement cost, then they can make the numbers work,” he said. “Even with the huge cost of build- ing a manufacturing facility, new construction may end up being the best route.”
Older sites such as Boxwood Road are desirable because newly developed land is more likely to be farther from major consumer markets, Vodinelic said.
“In many markets, there is a lack of adequate develop- ment sites that have the prox- imity to employment base and highway access that a lot of these former manufac- turing plants have,” he said.
The large size of older manufacturing sites also draws logistics companies, which now demand 600,000 to 1 million square feet, about twice the area they typically occupied 10 years ago, Vodinelic said.
In Piscataway, the Rockefeller Group, a commercial real estate developer, is remakinga 228-acre site once occupied by a Dow Chemical plastics factory, and build- ing five structures totaling 2.1 million square feet primarily for the distribution industry.
The site, close to New York, the New Jersey Turn- pike and Interstate 287, offers a rare opportunity, said Brandi Hanback, execu- tive vice president for indus- trial development at Rockefeller. “It’s very unusual that a site of that size is available in New Jersey,” she said.
The first tenant, Best Buy, has set up a distribution cen- ter there, and interest from other companies has been strong enough to accelerate the construction schedule to three years from five, Hanback said.
In addition to the scar- city of land in northern and central New Jersey, she attributed the demand to the proximity of ports and the availability of labor for logistics companies.
“It’s a good microcosm of what’s happening in the industrial real estate market in general and especially in these gateway markets like northern New Jersey,” she said.
In Lorain, the site of the former Ford plant, which closed in 2006, is being used by distribution companies including Trademark Global and Comprehensive Logistics.
Trademark G lo b al receives, packs and ships consumer goods for internet retailers, and Comprehensive Logistics is a thirdparty provider for a Ford truck plant in Avon, Ohio.
The Industrial Realty Group, which specializes in the adaptive reuse of com- mercial real estate, demol- ished part of the 3.8 mil- lion-square-foot plant and improved facilities for future tenants in the remaining structure.
In Pontiac, Michigan, Industrial Realty converted a former GM plant into a center for industrial and logistics companies including Fanuc America, a Japanese robotics company that uses 400,000 square feet of former office space for light assembly, warehousing and distribution.
In reusing such sites, logistics companies are position- ing themselves geograph- ically to serve a surging demand for same-day delivery of online purchases.
“L ogistics i s t h e fastest-growing segment within the real estate industry,” Hanna said. “Everyone is trying to figure out how to get their product to the con- sumer the fastest.”