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In
Madison County, one of the world’s largest warehouse/distribution
districts houses some of the biggest players in the world
By Jim Baer
Ten years ago, when someone purchased a dinette set, it was
shipped from North Carolina, and arrived in St. Louis in three
days.
The distribution from manufacturer to market has changed dramatically.
That dinette you purchase today is now built in Shanghai. It
may take 30 days by cargo container ship to first reach the
west coast from Asia, then by rail to Chicago and finally on
to the St. Louis region. Distributors can no longer count on
a short distance from construction to point-of-sale. Warehouses
have to have ever-increasing inventory to meet the demands of
the consumer. The needs are for bigger warehouses, and more
of them.
So, out of a former bean field in Edwardsville has grown one
of the largest warehouse centers in the world.
Terry Stieve, senior vice president for Colliers Turley Martin
Tucker and a project head in the warehouse market explains the
modern differences.
“In some ways, we are beneficiaries of great congestion,” says
Stieve. There was a time when the major warehousing of goods
would be mostly in suburban Chicago (the world’s third-largest
freight center). But the trucks are bogging down in that expansive
interstate traffic, and time is money. “Manufacturers now prefer
doing business in St. Louis, where traffic is not nearly as
bad.”
The Fortune 500 companies love Interstate 270. They can get
those trucks from the west coast, passing quickly around St.
Louis, and get in and out of Edwardsville in the blink of an
eye. “In some ways, it is just a perfect storm,” says Stieve.
Stieve, who used to play pulling guard for the St. Louis Football
Cardinals attacks real estate with the same gusto he used to
knocking back defensive linemen in the National Football League.
His enthusiasm for real estate reflects a winner-take-all attitude.
Tenants in Edwardsville include some of the biggest players
in the world. World Wide Technology has 500,000 square feet
of space in Edwardsville. Super Value (owners of Dollars With
More Stores) are key players and so too are Procter & Gamble
(1,646,000 square feet), Dial Products (1,312,000 square feet),
Spectrum Brand (1,017,780 square feet) and the Hershey Company
(1,100,000 square feet).
Procter & Gamble maintains a busy operation. They will receive
upwards of 800 shipments of goods per day.
“The new global economy requires more warehouse storage and
less manufacturing space,” Stieve indicates.
“Today, it’s all about super chains and their demands, rattling
off the major players Wal-Mart, Target and Costco. “They dictate
how, when and where shipments will be made, and we need to maintain
the optimum facilities to take care of their needs.”
Being located in the Midwest where the best road and bridge,
rail, water and air transportation exists surely doesn’t hurt
local storage or distribution.
About the importance of building a bridge spanning the Mississippi
River from Missouri to Illinois, Stieve comments, “Without a
doubt, this is the single most important factor in the labor
market today in this region. Each day, more than 70,000 highly-skilled
workers cross over into Missouri and work at high-paying jobs,
mostly in downtown St. Louis. To build a bridge and charge daily
tolls to these workers would be very short-sighted. Not building
this bridge would diminish our chances for businesses, especially
in the downtown market to continue to grow. You can talk about
abatements and special financing, but the availability of this
labor force is the most important factor in the growth of our
economy today. Without this key labor force, you won’t have
the key building block towards advancing our economy in the
future,” says Stieve. Further, “If we wait too long to build
this bridge, it will be too late and we won’t be able to go
back and fix the problems,” he says. “The City of St. Louis
would get hurt the most,” he says in conclusion.
“It’s all about supply and demand. St. Louis has never had enough
supply space and this creates all kinds of opportunities,” says
Stieve.
The St. Louis metropolitan area’s industrial market continued
its expansion in 2006. Nearly five million square feet of warehouse
space was completed, while a million square feet of obsolete
space was demolished. Occupancy increased by 2.3 million square
feet. The excess of new construction over occupancy growth pushed
vacancy up by a half a percent to a still healthy 6.5 percent.
Illinois led the metro area’s 2006 absorption with 1,097,000
square feet. St. Charles County absorbed 856,000 square feet
and Mid-St. Louis absorbed 656,000 square feet.
The speculative share of new warehouse construction has increased
steadily in the last four years, and will do so in 2007. Two
million square feet of new construction had been leased in 2006,
as predicted by the end of the year.
The St. Louis Federal Reserve District in November reported
plans for expansion by manufacturers in primary metals, biofuels,
plastics, chemicals, aerospace, packaging and paper. Freight
transportation businesses also reported plans to open or expand
facilities, pressing the need for more rental and purchase storage
space on both sides of the river.
At the same time, bulk buildings continue to be built. Bulk
buildings are buildings larger than 40,000 square feet with
less than 10 percent of office space and with ceiling heights
of at least 18 feet.
This market has been centered in Earth City and Hazelwood in
North St. Louis County, while more bulk space is coming rapidly
to the St. Charles area.
Stieve pointed out that Korte Construction and Clayco are the
major builders of bulk buildings. Though Stieve spends a lot
of time in Edwardsville, he handles rent and sale of property
in Vinita Park, Wentzville, Earth City and Dupo as well.
There are other reasons why Edwardsville, with extensive space
at Gateway Commerce Center and Lakeview Distribution Center
is a platform for global warehousing.
“Costs are such an important factor. Manufacturers are interested
in reducing costs and serving their customers better,” says
Stieve. “Leasing rates may be in the $4 per square foot range
in Missouri and $3 in Illinois. By the time you factor in TIFs
(tax increment financing), you may be down to $2 a square foot,
and when you’re talking about buildings bigger than one million
square feet, that’s a big difference,” notes Stieve.
Edwardsville is poised for future growth. The City has developed
12 million square feet of warehouse space, what with the development
of Lanter I and II. Lanter III is a project about to launch
in 2007 in southern Illinois. Edwardsville has set aside another
40 million square feet of space zoned commercial for future
growth.
“This is pretty much dynamic growth. There is a great association
in the area between the businesses and with Southern Illinois
University Edwardsville.” The big question is: will there be
enough talented employees to man these facilities in future
years? Stieve questions.
Surprisingly, there may be 400 to 500 employees in the larger
facilities. “There are not just fork lift operators inside those
buildings. There are people there for inventory control, logistics,
all kinds of technical skills,” says Stieve. “The leases want
their goods protected from damage.”
The demands for more warehousing space hinges on future land
acquisitions. Hassan Jadali, vice president in land for CTMT
explains. “St. Louis’ rising stature as a regional distribution
center will foster more industrial development on both sides
of the river. Big-box bulk centers require large parcels of
land, which position southern Illinois and St. Charles County
as forerunners in this arena.”
For more information on the distribution sector in the St. Louis
region, please visit the St.
Louis RCGA website.
Status
of Real Estate
Colliers Turley Martin Tucker reports that despite low interest
rates, the residential housing market has slowed substantially.
Quite a few homebuilders have pulled back, at least temporarily
from the new construction market. Sales of residential land
in West St. Louis County, despite skyrocketing prices have
maintained solid demand. Older homes are giving way to new
infill construction. Jefferson County home construction
will continue to boom.
Attention on the southern Illinois home market remains somewhat
strong. Residential developments will continue to sprout
in Columbia, Waterloo and O’Fallon according to CTMT personnel.
Even better, retail developments will follow the rooftops
in St. Charles and Jefferson counties along with Madison
County in Illinois.
It looks like 2007 will be a strong year for warehouse space
construction, rental and purchase. It may be more of a slow-down
year in residential construction. At least the experts see
it that way. |
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