Evaluating Talent Pools Could Save Big Box Industrial Occupiers Millions

With fierce competition for industrial labor, big-box industrial occupiers are looking beyond current economic and talent conditions to consider future workforce needs during site selection.

Building a talent-centric location strategy that balances labor quality and cost can amount to millions of dollars in savings for industrial occupiers, according to an industrial report by CBRE. For example, to achieve $1 million in annual savings, an industrial employer would need to reduce real estate costs by $2.08 per square foot per year. Or, to save the same $1 million, it can redeploy headcount to a market with a slightly lower labor cost. Annual savings of $1 million can be achieved with 500 employees working for $1 less per hour, the report noted.

Big-box industrial facilities are experiencing slower leasing activity, higher vacancies and lower rent growth amid macroeconomic uncertainty and a surge in construction completions. U.S. industrial leasing activity fell 8.8% last year while supply expanded by nearly 1.2 billion square feet, said CBRE.

When signing new leases, occupiers have emphasized supply chain resilience, proximity to growing population centers, automation-ready workspaces, and e-commerce fulfillment when choosing sites.

To understand the impact of labor on site selection, CBRE applied a sample risk profile to its list of North America’s top 25 core, gateway and emerging markets to see how well each market could accommodate a moderate-sized industrial facility. The hypothetical facility includes 500 general manufacturing and supporting logistics roles, with an average starting wage of $17.00 per hour, an annual turnover rate of 35%, and an applicant-to-hire ratio of 10:3.

Markets that could comfortably support the hypothetical operation without adjusting labor assumptions include Houston, Memphis, Long Beach, St. Louis, Phoenix, Nashville and Savannah. Markets where labor supply and starting salary ranges would present a challenge to the hypothetical facility include Seattle; Stockton and Ontario, California; Baltimore; Louisville; Indianapolis and Kansas City.

Competitive positioning also plays a role in achieving a preferred risk level, said CBRE. Markets with substantial manufacturing and logistics talent pools may be more resilient to competition from new and expanding employers, while employers operating in smaller labor markets are typically more sensitive to increased competitive headcount, said the report.