For Cheap Space, Go South

Using as its base Logistics Today’s 50 Most Logistics Friendly Cities, The Boyd Company evaluated overall operating costs for distribution centers and concluded Little Rock, Arkansas is the least expensive of the cities examined if you own a facility or Mobile, Alabama is the cheapest to lease. The most costly sites included New York, San Francisco, Boston and Los Angeles.

The proprietary BizCosts report, “A Comparative Operating Cost Analysis for Distribution Warehousing,” compiled costs for labor, utilities, construction or leasing cost, ad valorem and sales taxes, comparative shipping costs and heating/cooling costs for a 350,000 square-foot facility employing 150 non-exempt workers.

The 2006 report scored New York as the most expensive place to own a warehouse (annual operating cost $18,204,373), up 15% from the prior year. At the low end of the ownership scale was Little Rock, Arkansas with a total operating cost of $11,514,935. The most expensive leased space is in San Francisco ($15,694,805) and the lowest lease cost is in Mobile, Alabama ($10,111,625).

Boyd’s first comparison in 2005 was based on that year’s 50 Most Logistics Friendly Cities developed by Logistics Today and Expansion Management magazines. The subsequent listing reflected some changes in the 50 Most Logistics Friendly Cities, so Boyd retained the prior-year top 50 and added new entrants to reach a total of 61 cities ranked in 2006.

The Logistics Today/Expansion Management tool ranks all 362 standard metropolitan statistical areas (SMSAs) identified by the U.S. Census Bureau.

The cost details in the Boyd model assume a single 350,000 square foot facility. Basic costs include wages and benefits for 150 non-exempt workers from order pickers to lift truck operators and support staff.

A shipping cost model assumed truckload shipments from a single location to the 10 destination markets that would reach the largest number of U.S. consumers. Though the shipping cost model is unlikely to reflect a real distribution network, it does offer some means for examining the impact transportation has on siting a warehouse, according to Jack Boyd. Based on the transportation cost comparison, inland sites like St. Louis and Kansas City offer the least expensive central distribution points. Coastal cities of Portland, Oregon; Seattle, Washington; Boston, Massachusetts; and San Francisco, California are as much as 70% higher when used as a single location to serve the U.S. market.