The distance between a company’s warehouse and the nearest airport is key to on-time delivery of goods, especially in the Internet age. However, distribution efficiency often forces a choice between accessibility and high-storage costs.

The emergence of the Internet as a means of commerce has brought with it the increased pressure of shipping goods more rapidly. To remain competitive, manufacturers and distributors now must take more care, than ever before, in planning out and setting up the transportation of their goods. An important factor in how quickly a company can get its goods out the door and on its way to its customers has to do with warehouse or distribution center location in respect to major airports. A less-than-optimum location can significantly damage a supply chain’s effectiveness.

Of course, most companies would probably prefer warehouse space right on the airport grounds. But the limited availability and exorbitant costs of this space make the renting of such locations prohibitive. Therefore, companies choose the next best thing: a warehouse location next to the airport, or at least within a five miles radius. The costs of these prime locales vary widely from city to city depending on a number of factors. Sometimes even the basic rental rates themselves don’t provide a complete picture of the true cost of doing business at these locations over time. For companies planning on expanding their warehousing capabilities into such quarters, it is helpful to have some idea of comparative rental costs across the nation. A recent survey by CRESA (Corporate Real Estate Service Advisors) provides this perspective.

In the survey, CRESA gives an overview of the rental costs of near-airport warehouse space around the country by examining the annual rates paid for this space in 20 major US cities. The information for the survey was gathered in the fourth quarter of 2000 with the major criterion being cargo tonnage and concentration of airport-related companies. Generally, locations included in the survey had a square-footage of 5,000 to 50,000 with dock loading and terminal access. With a few exceptions, most were located within five miles of an airport.

The survey found that the average rental rate per square-foot in these areas was $6.73. However, it is important to note that a wide variety of factors have been combined in estimating the rates. For example, a company renting space near Detroit’s Metro Airport for $6.78 might well ask why it is costing them more than Detroit’s $5.42 average. In a case like this, the higher rate is usually attributable to a better-than-average office finish or a particularly prized location. Were the same company to move to Los Angeles and attempt to rent warehouse space with the same conditions, they could expect to pay a similar 25% premium over LA’s $10.36 per square-foot average.

Companies shopping for near-airport warehouse space should also be aware of the host of variables that affect costs. For instance, a renter that wishes to dispose of its surplus space may sub-lease it for a price significantly less than what they pay. Conversely, demand occasionally outweighs supply and when it does, warehouse space might rent for a higher rate than is typical. There are also differences between operating expenses and lease terms to consider. Rates may also appear to differ if presented with taxes and insurance incorporated.

A cursory glance at the survey’s results, (http://www.aircargoworld.com/feat/), reveals that New York, San Francisco and Boston have the nation’s highest near-airport rental rates. This is because these airports have great space restraints and a very high concentration of freight forwarders. New York tops out at $13.83 and the survey notes that its warehouse real estate has “limited options for tenants needing space.” Minneapolis/St. Paul is the cheapest of the 20 airports surveyed with a net rental rate of $4.17 per square-foot. From the high-end costs of the coastal cities to the lower end in Minneapolis/ St. Paul, it’s apparent that the different factors play a role in decision making. Premium location, site features and warehouse specifics need to be worked into the overall assessment of the space and its value over time.

Sources: Airport Costs
Ed Riggins
Air Cargo World Online, March 2001
http://www.aircargoworld.com/feat/feature3.htm

Warehouse Rental Rate Survey
CRESA, 2001
Air Cargo World Online, March 2001
http://www.aircargoworld.com/feat/side3_0301.htm