Costs of transport, freight, and tolls outweigh lease cost in decision-making regarding the best location for logistics warehouses.
Companies hunting or reviewing their warehouse locations turn to real estate agents not only to get information about the area, building characteristics, and lease amounts, but also information that takes into account the logistics chain, because that is the determining factor for defining the best location for warehouse.
In the process of choosing a warehouse, various factors need to be considered. Therefore, we are working to incorporate new data in our studies, such as number of tolls on the major highway corridors, distances from the main consumer center, among other things, as shown in the chart below.
Help from technology and expertise
In the United States, our area of real estate transactions for industrial operations already works with logistics chain experts to assist in the analyses of all these variables and help companies make the best decisions about the location of their warehouses. We also use a software package which cross-references data such as main consumer center, product type, volume of sales and inventories, and transport costs to indicate the best properties to meet the company’s needs.
In Brazil, where the precarious highway infrastructure and the high fuel costs negatively impact the cost of transport, increasing the average cost per kilometer traveled in relation to other countries, it is essential to assess the logistics chain during the process of choosing the property. Otherwise, the efficiency of the company’s entire operation could be compromised.
In a time when companies of various sectors are necessarily having to review costs and optimize operations, leverage productivity to increase margins, there is no room for mistakes in real estate decisions. Therefore, we need to understand the real estate demand in the context of the processes and the company’s business in order to offer the best property.
Logistics and real estate cost
For this reason, in our view, the lease value of the logistics warehouse is not the determining factor for the choice of the property. According to data from our research, for companies, logistics represents 80% of their operational costs, while the property cost represents approximately 10%.
Sometimes, the company prefers to pay more for a property to maintain the efficiency of their logistics chain. All these analyses must necessarily be done on a case by case basis, taking into account the company’s sector of activity, the type of product it manufactures, type of sales, whether it’s e-commerce, physical stores, distribution, among other things.
We concluded that there is no nearby, faraway, expensive, or cheap property. There will always be a property that meets the company’s need, in the best location and with the best cost for its operation. And, by incorporating in our studies information that takes the logistics chain into account, we are prepared to offer our clients the chance to make a more assertive choice about the best place for their warehouse.
Márcia Castro is director of Transactions at JLL.
Accurate data and information assist in real estate decision-making
Source: JLL – Market Research and Intelligence – data for April 2017
Photo credits: Jafo Fotografia