09/22/2024
Industrial is Hot: How your Municipality can Join the Party
When considering whether to—or how to—grow their local industrial base, municipalities can benefit from understanding the economic trends that have influenced recent development, what modern industrial development can look like, and the factors that determine a municipality’s competitive position.
Impact of Broader Trends on Industrial Development
The industrial real estate sector has been shaped by wider economic trends. Manufacturing, once the predominant use of industrial space, experienced a sharp decline over the last 25 years. Per the Bureau of Labor Statistics, Illinois lost nearly 330,000 manufacturing jobs between 1998 and 2023 as many companies relocated to the Sunbelt or overseas. (There has been some growth in manufacturing employment since 2021, however.)
In the last decade, growth in transportation and warehousing partially offset manufacturing job loss. Per the US Census Bureau, e-commerce accounted for 16% of total retail sales in 2024 – up from 6.4% in 2014. The shift from distributing bulk products to retailers to distributing products directly to consumers altered warehouse operations and requirements. As many companies needed larger distribution centers, much of the older, existing industrial stock—developed with manufacturing in mind—was ill-suited to meeting the demand for buildings with larger floorplates, higher ceilings and automation capacity. New industrial development boomed to meet demand, increasingly spreading further outside of metropolitan cores to places where large sites were readily available. As a result of these broader trends, industrial space is now increasingly occupied by logistics uses.
Illinois’s Booming Real Estate Sector
The industrial real estate sector has grown significantly across the county, and in Illinois in particular, over the last decade. According to CoStar, over 950 industrial buildings, totaling more than 211 million square feet, were delivered across the state between 2014 and 2024. While Chicago and its suburbs captured the bulk of this development, industrial growth has been a statewide phenomenon. Many of the biggest pipeline projects today are located outside of the collar counties. Gotion is building a $2 billion electric vehicle battery gigafactory in Manteno; Walmart is investing in a high-tech, automated distribution center for perishable goods in Belvidere; and Kraft Heinz is developing one of North America’s largest consumer packaged goods distribution center in DeKalb.
Joining the Party: The Local Benefits of Industrial Development
Many municipalities recognize that industrial development can be a benefit to their community. Industrial businesses can help grow and diversify the local tax base. They also tend to offer well-paying jobs, many of which are attainable without a bachelor’s degree. Furthermore, modern industrial development does not necessitate municipalities sacrificing community goals for economic ones.
Modern business parks can blend in smoothly with their urban or suburban surroundings. Many Illinois municipalities, such as Elgin and Lincolnshire, have industrial design guidelines in place to ensure that new industrial development is sensitive to the adjacent built environment. Some business parks, meanwhile, provide community amenities. For example, the Sycamore Prairie Business Park features walking and bike paths across
its campus that connect to the regional trail network.
Industrial businesses in the Sycamore Prairie Business Park (Sycamore, IL). Source: SB Friedman Development Advisors, LLC.
Understanding Competitive Position
Municipalities hoping to attract or grow their industrial base should first understand their competitive position. There are five primary, competitive factors that influence the location and type of industrial development.
- Transportation: Access to the regional transportation network is a major competitive advantage in terms of attracting industrial users, particularly those seeking access to the regional supply chain and freight distribution networks.
- Labor Force: Many industrial businesses rely on a skilled labor force. The availability of, and cost to hire, qualified workers are key factors influencing development decisions.
- Supply Chain: For businesses in certain sectors, proximity to supporting industries in the supply chain can lower the cost of business by reducing transportation costs and optimizing logistics.
- Developable Land: The size of available sites, cost per acre, opportunity for future expansion, zoning and entitlements in place, and the availability and cost of utilities all impact development.
- Tax Incentives: Prospective tenants often seek locations with lower land costs and reduced tax burdens. Local and federal tax incentive programs are also often used to attract industrial tenants and reduce development costs.
Defining an Industrial Attraction Strategy
While municipalities are unable to change some of the characteristics that influence their competitive position, they can nonetheless plan for the most feasible type and scale of potential industrial development. Muncipalities should first assess where they have available development or redevelopment sites, whether they be greenfield sites, infill sites, or existing buildings that can be leased and/or reused. The types of sites that are available can determine the end user. Warehouses generally require large, highway-adjacent sites, while data centers need significant utility capacity, for example. Various manufacturing businesses, meanwhile, have widely differing needs, depending on the sector.
From there, municipalities can work to define a market-responsive real estate strategy. Local industrial business owners, brokers, and other real estate or economic development professionals can be a valuable resource in identifying target sectors or building typologies. As part of the strategy, municipalities can take further action to support industrial development, such as ensuring zoning and other entitlements are in place, planning for infrastructure buildout, or partnering with educational institutions around workforce training.
Author: Michael Ryzhov, Project Manager at SB Friedman Development Advisors, LLC
SB Friedman Development Advisors, LLC is a team of data-driven analysts, civic-minded planners, and implementation-focused problem solvers who work closely with public, private and institutional clients across the country. We are eager to tackle various land use and development issues and establish plans, strategies and partnerships to overcome them. Our primary objective is to assist our clients in achieving their economic development goals.
The APA-IL thanks SB Friedman Development Advisors, LLC for being a 2023-24 Tier II Sponsor and supporting Great Communities for All in Illinois!
Photos: Industrial businesses in the Sycamore Prairie Business Park (Sycamore, IL). Source: SB Friedman Development Advisors, LLC.