Industrial Development Boom Faces Growing Issue of Land Constraints
“Buy land; they’re not making it anymore.” Newmark’s Lisa Denight cites the famous quote from Mark Twain to underscore an issue the 19th century humorist and author couldn’t have anticipated: “Demand for modern industrial facilities to support supply chain evolution continues to sustain a historic development boom, which has strained a finite resource: land.”
An average of 117,000 acres of land is absorbed annually across the U.S. for the development of industrial properties. How long that pace can be maintained is open to question when the supply of viable sites is diminishing.
“This is most acute in urban gateway markets where developable land is scarce, expensive, and subject to competition from a multitude of potential uses,” writes DeNight, Newmark’s director, national industrial research. “As firms build out their supply chain presence to serve regional population centers, many secondary markets are now reaching a point of maturation where land constraints are also being observed.
“This dynamic is driving up costs; across the U.S., average per-acre pricing on land purchased for industrial development increased 36.0% from mid-year 2020.”
As of August of this year, more than 550,000 acres of land have been identified for proposed industrial facilities or are being publicly marketed for sale, ideally suited for industrial use, DeNight reports. The majority of these sites are located in southern and western markets: Texas, Georgia, Florida and South Carolina alone account for a third of the current total estimate.
Given the dwindling acreage available for industrial development, where can developers find opportunities for industrial expansion? DeNight notes that renovation of obsolete industrial properties and redevelopment of underutilized non-industrial facilities are well-established and growing trends in many markets. “These strategies offer solutions to supply and land constraints while modernizing market inventory,” she writes.
Longer-term strategies may include the remediation and revitalization of contaminated land sites. There are an estimated 500,000 brownfield sites across the country, and approximately 13,000 active Superfund sites tracked by the U.S. Environmental Protection Agency.
Industrial redevelopment of these land sites takes time, with remediation a necessary first step. However, DeNight points to the wide-ranging environmental, economic, and social benefits of such redevelopments while they’re satisfying continued robust demand for modern industrial space.
DeNight cites examples of formerly contaminated sites that have gone on to support large-scale industrial development. A case in point is the 700-acre Troutdale Reynolds Industrial Park in the Portland suburb of Troutdale, OR (pictured). Formerly a long-established Reynolds aluminum plant that became a Superfund site, it’s now home to more than three million square feet of warehouse space.
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).