U.S. Site Selection Profile: Distribution Centers
by Michaela Martin, on Nov 16, 2023 9:30:00 AM
Distribution centers are the critical backbone of an efficient and reliable supply chain. Technological advances, such as AI, robotics, automation and cloud services, are further supporting and improving efficiencies across many distribution centers to ensure goods and services reach their retail and direct-to-consumer customers.
fDi Intelligence highlighted 34 warehousing and distribution location projects since January 1, 2023. This activity represents the creation of 6,526 jobs and a total capital investment of $1.5 billion.
Distribution centers extend beyond simple product warehousing, offering full operational support across all industries through fulfillment centers, breakbulk centers, package handling and cold storage facilities. Site Selection Group, a full-service location advisory, real estate and economic incentive services firm, proactively monitors critical distribution center real estate data metrics and follows national site selection trends to help our clients make informed location decisions.
Based on Site Selection Group’s very recent experience, site selection activity in this industry is being driven by several factors, most notably consumer demands, but also the colocation with projects in the automotive, semiconductor and solar industries. This activity is driven by companies seeking to insulate themselves from supply chain disruptions with initiatives in onshoring and re-shoring and by leveraging optimal locations near population centers to serve speed-to-market customers.
Top site selection considerations for current distribution center projects
- Location efficiencies: Distribution companies require proximity to major transportation routes, carrier hubs and customer centers to reduce overall transportation costs and distance to reach customers. Implementing network and logistics optimization into the site selection evaluation can help uncover aligned markets that provide speed of delivery, routing efficiency and low transportation costs to ensure goods and services reach their retail / direct-to-consumer customers.
- Utility capacity for increased automated facilities: As companies combat labor shortages with the pressure to avoid supply chain disruptions, robotic and automation technologies are being leveraged to help increase productivity, improve quality control, and handle repetitive and physically demanding tasks. As automation initiatives are implemented, confirming constant, reliable electrical capacity is available for distribution facilities will become a critical component in the site selection process.
- Workforce remains the core focus: While the industry is constantly evolving, for markets to remain competitive, they must be able to provide access to an existing talent pool. In addition, development programs for a future workforce should be available across the value chain of logistics and supply management, including purchasing, receiving, material handling, inventory, financial controls and transportation. With the rise of highly automated facilities, access to a qualified and trained workforce will remain a prime focus within the distribution industry.
Recent distribution center site selection announcements
The following list represents five notable distribution center site selection announcements from the last six months. Most of these announcements are located near major metropolitan markets to leverage proximity to major interstates, workers and customers. For example, Hahn & Company expanded near the recently announced Hyundai electric vehicle and battery complex in Georgia.
- Procter & Gamble (P&G) (Jackson, GA)
Investing $205 million and creating 300 new jobs to establish a new automated distribution facility for consumer goods.
- United States Cold Storage (Hebron, IN)
Investing $124 million and creating 60 new jobs to establish a new distribution facility for refrigerated and logistics services.
- Chick-fil-A Supply (Kannapolis, NC)
Investing $58.3 million and creating 85 new jobs to establish a new food distribution facility.
- Hahn & Co Auto Holdings (Statesboro, GA)
Investing $40 million and creating 160 new jobs to establish a heating/cooling automotive systems distribution facility.
- Southern Coil Solutions (Bowling Green, KY)
Investing $27 million and creating 30 new jobs to establish a new automated aluminum and steel coil distribution facility.
Economic incentive packages vary by state and locale but are meaningful to the industry
Operational factors such as proximity to customers and ports of entry, as well as a robust and available workforce, are critical in site selection. In addition, economic incentives can often be a significant differentiation between candidate locations. Using fDi Intelligence, Site Selection Group tracks meaningful economic incentive packages in the warehousing and distribution industry. The following represents several noteworthy incentive deals completed in 2023.
Capital Investment ($M)
Incentive Amount ($M)
|United States Cold Storage||IN||124||60||125|
|Nuuly (Urban Outfitters)||MO||60||750||12.28|
|DHL Supply Chain||IN||119.33||676||5.5|
|Agile Cold Storage||DE||170||130||4.56|
|Arrowhead Engineered Products||TN||Not Specified||400||1.5|
Overall, economic incentive assertiveness can differ extensively by region. The following represents the most common types of incentives currently being leveraged by companies.
- Property tax assistance: Whether in property tax abatements, refunds or payment in lieu, offsetting property taxes can be a meaningful incentive for these large capital investment projects.
- Infrastructure and development assistance: The most popular mechanism to offset upfront capital investment is assistance aimed at infrastructure and or civil development costs.
- Job creation cash grants: While the most coveted by companies, upfront cash assistance is becoming less popular among states and communities. However, several states still offer closing fund assistance based on job creation and payroll.
Site Selection Group can be a resource for distribution centers
Transportation costs account for a sizable portion of a company’s logistics costs, rendering it a critical driver of many site selection projects. For projects that are driven by such costs and speed to serve customers, a location advisory expert such as Site Selection Group can assist companies in evaluating target markets to properly test supply chain sensitivities and consider them in the site selection process alongside other factors such as labor availability, operating costs, economic incentives and availability of industrial real estate.