Transportation and Industrial Property Rents in Chicago

Maria R. Ibanez, Marquette University

Abstract

There are many factors to be considered in the decision of which industrial property to lease. With expenditures on transportation and cost of logistics accounting for 4.8 and 7.7% of GDP, respectively, transportation is a central component of total costs for most businesses and therefore relevant to strategic decisions of where to locate the firm. The closer businesses locate to transportation infrastructure (e.g. airports, roads, highways, railroads, high-speed railways, public transport, airports, waterways or ports), the lower the shipping costs, particularly in an environment of rising fuel costs. Thus, it is reasonable to assume that transportation access (an attribute of location) to a network of highways, airports, rail lines, and ports is perceived as a key benefit of the industrial property. The relevance of transportation costs for property values already appears on initial models of urban residential structure, i.e., the mono-centric model of Alonso (1964), and the model of land use of von Thünen (1966). To date, most studies on the impact of transport infrastructure on real estate focus on the negative externalities such as noise or contamination from aircraft and road traffic, probably because they cover the residential markets (Conroy and Milosch, 2011). This research looks at the proximity to transportation from an industrial user perspective, and we expect this proximity will bring positive market advantages to property-owners through higher rents.