The broader transportation, warehousing, distribution and logistics industry has had a banner year in 2021 across the nation. And this has especially been the case in Chicago, one of the country’s most important distribution hubs. This is why on Friday, December 3, dozens of commercial real estate professionals gathered at the Hyatt Lodge in Oak Brook for Chicago Industrial Properties’ 18th Annual Transportation & Logistics Summit to discuss the biggest themes and challenges facing the regional transportation and logistics industry at this moment.
The event’s first panel discussion, focused on the overall state of the market, featured Karen Lauerman, President & CEO of Lake Co. Indiana Economic Alliance; Eric Pitcher, Regional Manager of Economic Development for BNSF Railway Company and John Noak, Mayor of the Village of Romeoville. The discussion was moderated by Brian Liston, Partner, Liston & Tsantilis, P.C.
One of the biggest points of discussion during the first panel was the theme of supply and demand, as well as the ongoing supply chain issues causing delays and price increases for materials. From a transportation perspective, the railroads have been operating at full capacity for years, said Pitcher, indicating that the BNSF infrastructure has had zero hours of downtime in the last two decades.
“We’re 24/7, 365; all the railroads are, in terms of operations,” Pitcher said. “We do not close down ever.” While the railroad is running constantly, one of the biggest issues that BNSF is facing is the lack of capacity at coastal ports. However, many of the bigger ports are continually adding capacity for more product to ease the overly strained supply chain but then there’s the issue with staffing in trucking and other pieces of the supply chain puzzle. “Then the challenge is how do we get the containers out?”
The State of Indiana is also ceasing the moment by competing with cities and villages across the Chicago region for new investment from industrial developers and their client tenants. But one big difference that northwest Indiana is witnessing at this moment is the sheer level of demand for new space and the increasingly limited development opportunities. This has led developers to look into brownfield redevelopment.
“We have an urban core industrial core and our legacy industries are obviously the largest refinery in North America with BP the largest steelmaking facility and Cleveland-Cliffs, formerly ArcelorMittal, and of course US Steel,” said Lauerman. “But as we diversify into e-commerce and distribution of logistics, we’re finding that the infill opportunities are becoming more apparent with brownfield redevelopment.”
Back in Illinois, Romeoville has been in the headlines this year after the announcement of some major industrial deals, particularly the Wayfair facility being developed by Duke Realty. But beyond tax incentives and other municipal tools available at Mayor Noak’s disposal, one of the other big things that Romeoville has going for it is access to talent and workforce.
“Industrial growth continues to be phenomenal for us and our entire region, not just our community but all the nearby areas as well,” Noak said. “But we have a real issue of workforce and the further [developers] go out, that becomes an even bigger strain on getting that workforce to those locations and having enough workforce.”
To help bolster the industrial growth in Romeoville and beyond, Noak believes that residential housing will also have to keep up. The strains on both industrial and residential real estate asset classes are connected, and in order to see the industrial boom truly meet its full potential, there has to be continued investment in new housing, senior living, schools and so forth.
“So hopefully we’ll have some opportunities in housing, but really in every sector,” Noak continued. “We’re very fortunate we’re coming off of a good year with this with our Wayfair deal, which is almost complete.”
“You stole that from me,” Lauerman jokingly retorted, hinting at the competition for new development investment.
“We probably gave the biggest deal in Illinois history,” Noak said about the Wayfair deal. “Remember that.”