Positioned for Performance: Industrial Site Selection Essentials

Location plays a critical role in the performance of any real estate asset, influencing everything from tenant demand and leasing velocity to operating costs and long-term value. Whether assessing a potential acquisition, underwriting new development, or repositioning an existing facility, investors must understand the characteristics that make a location competitive and resilient. This is particularly pivotal for industrial asset classes where operational efficiency and logistical access are key drivers of tenant demand.

Transportation Access & Site Infrastructure

Proximity to key transportation infrastructure remains the foundation of industrial site selection. Direct access to highways, interstates, and ports significantly reduces transit times and logistics costs, top priorities for tenants managing increasingly complex supply chains. Depending on the tenant’s operations, rail and airport proximity may also be critical.

From a broader investment perspective, proximity to airports, universities, and other economic anchors can signal long-term growth potential. These institutions support employment, drive innovation, and often attract surrounding development, contributing to sustained industrial demand.

Equally important is the functionality of the site itself. A flat, well-drained parcel with adequate truck courts, trailer parking, and efficient loading infrastructure increases operational viability. Tenants may also place a premium on access to three-phase power, water and sewer, and reliable broadband connectivity. Even well-located sites can become less attractive without this foundational infrastructure in place.

Labor Availability & Market Fundamentals

Even the best-located assets can underperform if the surrounding area lacks a dependable and cost-effective labor force. Employers assess not only labor availability, but also wage competitiveness, commute times, and the depth of the local workforce. In many cases, these labor-related factors carry more weight than rent, particularly in logistics and light manufacturing where staffing is critical to daily operations.

Beyond labor, broader market performance indicators should inform location strategy. A property with strong physical characteristics may still struggle in a market that is oversupplied or underperforming. Key metrics to evaluate include:

• Vacancy rates, particularly for comparable buildings by size, age, and class
• 12-month net absorption, which reflects the direction and velocity of leasing activity
• Rental rates and growth trends
• The development pipeline, including new product currently under construction

Markets with positive net absorption and limited new supply are typically better positioned for long-term rent growth and tenant retention than those facing elevated vacancy due to speculative overbuilding.

Zoning, Entitlements & Long-Term Flexibility

Understanding a property’s zoning and entitlement status is essential, particularly when evaluating long-term viability. Confirm that current operations are permitted as-of-right. In some cases, a building may be operating under a grandfathered use, and a vacancy or change in tenancy could trigger costly entitlement hurdles.

Avoiding conditional use permits or rezoning efforts can reduce entitlement risk and shorten lease-up or development timelines. Properties with clean environmental histories, flexible zoning overlays, and physical capacity for future expansion offer greater adaptability in evolving markets. This optionality is increasingly valuable in a sector shaped by shifting tenant needs.

Total Cost of Occupancy

While rental rates are often in the spotlight, tenants ultimately make decisions based on total cost of occupancy. This includes not only base rent, but also taxes, insurance, utilities, transportation costs, and the impact of local traffic patterns on operations.

Local government policy can play a large role with these costs; some municipalities actively seek to draw industrial tenants with tax incentives and business-friendly programs, while others impose higher costs with less support. For many tenants, superior logistics, efficient infrastructure, and a favorable tax environment can justify higher base rent in exchange for lower total operating costs.

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The most successful industrial investments are those that align with how tenants operate today and how they’ll need to operate in the future. Evaluating location through the lens of tenant priorities, market dynamics, and operational efficiency allows owners to make better-informed decisions and position their assets for long-term performance. In a competitive and evolving landscape, location remains one of the few fixed variables in real estate investment, highlighting the need for thoughtful site selection early in the process.