Making the right choice requires balanced insight
Frank Van haesendonck
The right choice of location is critical to your business success. When determining the ideal location for your industrial building, many relevant factors need to be balanced.
These range from the purely physical to human and economic factors. Of course, each factor’s weight in your decision depends on the specific needs of your operation and the future activity you want to develop in logistics, production or assembly.
The cost factor
First, let’s talk about the rent of the building or the purchase price of land. In many countries, industrial plots close to logistics hubs or cities have become scarce and therefore expensive. Ground located at the periphery is generally less scarce and less expensive. Rents for buildings follow the same trend.
Second, think about the talent pool. Labour costs can vary widely from region to region and from country to country, and often are linked to the unemployment rate. When developing production or assembly activities, both of which are labour intensive, labour costs become more significant. While in a high tech industry, the availability of highly skilled workers will influence your choice. Other key cost elements certainly include energy costs and incentive programmes set up by (local) governments.
Availability of buildings or land
Then there is the issue of availability. Large industrial operations require large plots of level land. For a large logistics company, excellent access by road, water, rail or air is crucial. However, large sites close to logistics hubs, near the entrances and exits of motorways, near cities, etc. are very scarce – and therefore expensive – or even non-existent. Production companies on the other hand have greater freedom of choice, since a central or easily accessible location is less important. Here the need for specific ‘custom’ buildings often prevails. These companies therefore are frequently interested in less central locations.
Existing building availability is often greater in locations where demand is high, compared to locations with lower demand. But buildings for sale or lease are generally multifunctional, and built with logistic activities in mind. Therefore, prospective users with very specific needs find it difficult to meet their requirements with available buildings, and are often obliged to start from scratch and create or co-create a new project in collaboration with a specialised build-to-suit developer.
Transport facilities and infrastructure
If you provide just-in-time logistics, close proximity to your customer will be important. But in today’s world, every industry aims to reduce unnecessary flow times. Transportation is the industrial lifeline.
In today’s world, every industry aims to reduce unnecessary flow times.
Logistics activities usually generate significant truck traffic. Logistics sites are therefore best located near the entrance/exit of a motorway (which provides access to the international road network). These sites must also be easily accessible via wide and easily drivable, local access roads. Roads with frequent traffic jams are viewed as unfavourable. Manufacturing and/or assembly activities must also be easily accessible to truck traffic, but in general they tend to generate less truck traffic. Thus these sites do not require an (expensive) location near motorways.
Each activity has different accessibility needs. So the question is how accessible do you want to be, and what precisely ‘accessibility’ means to you. Will you, for example, be loading or unloading goods by rail? Access via a railway may be necessary for some industrial activities. In addition, nearby air or sea transportation facilities may be an advantage. This is usually the case for specialised logistics providers that are internationally active.
Core market access
A location near your intended market will save considerable money and time in bringing your product to the customer. The visibility element might be of some marketing importance when choosing a location, although this is probably less an issue for industrial brands.
A location near your intended market will save considerable money and time.
In most cases, a close link to a major market with a high population density and/or high or increasing purchasing power is an important decision factor. Think of the growing success of e-commerce in Central and Eastern Europe, which allows companies like Amazon to open multiple mega-distribution centres in these countries. But production companies too are also often forced to relocate their manufacturing activities to locations in or close to their markets. See for example the sharp increase in the number of car manufacturing plants in Central and Eastern Europe over the past 15 years.
Good decisions are always based on a clear and realistic picture of your (planned) needs, wants and ‘nice to haves’ in relation to the available options and the associated price tag.
ILD provides you with a clear view on location
A good list of factors should include all of the critical dimensions of your location planning. At ILD we are well positioned to assist you in evaluating different locations. We listen to your needs, propose options, and advise you on your location planning and actions. In short, ILD can provide you with a clear view on location.