The Role of Location in Industrial Real Estate Value

In industrial real estate, location isn’t just a factor—it’s often the single most important driver of value. Unlike other property types where aesthetics or amenities may weigh heavily, industrial properties succeed or fail based on how efficiently they connect goods, people, and supply chains. Understanding the role of location helps investors, developers, and tenants make decisions that maximize long-term value.

Why Location Matters More in Industrial Real Estate

Industrial assets—whether warehouses, distribution centers, or manufacturing facilities—exist to move products. Their utility comes from how well they facilitate logistics. A strategically located facility can reduce transportation costs, shorten delivery times, and strengthen a company’s ability to serve customers. For tenants, these factors directly impact profitability; for investors, they affect rent growth, tenant retention, and property appreciation.

For example, our recent article on Top Emerging Industrial Real Estate Markets in the U.S. shows how location dynamics create new investment opportunities.

Key Location Drivers of Industrial Real Estate Value

  1. Proximity to Transportation Infrastructure

    • Highways & Interstates: Easy access to major trucking routes can make or break a site’s desirability.

    • Ports & Airports: Properties near international gateways support import/export users and just-in-time logistics.

    • Rail Access: Intermodal connectivity is increasingly valuable for heavy industry and long-haul freight.

  2. Population Access & Consumer Reach
     In the e-commerce era, last-mile distribution is king. Properties located within one to two days’ drive of major population clusters command higher rents and lower vacancy. Being close to customers reduces delivery costs and enables faster fulfillment.

  3. Labor Force Availability
     A facility’s workforce matters as much as its highway access. Industrial tenants need a pool of skilled and unskilled labor within commuting distance. Markets with strong labor pipelines, affordable housing, and wage stability are more attractive.

  4. Cost of Land and Operations
     Low land costs can draw industrial growth to secondary or emerging markets. However, affordability must be balanced against accessibility—cheap land far from infrastructure may not deliver long-term value. Tax incentives, utilities, and local regulations also influence operating costs.

  5. Market Maturity & Competitive Supply
     Established hubs like Dallas, Chicago, and Atlanta benefit from scale, while emerging markets like Richmond or Phoenix offer affordability and expansion room. Location value is not just about geography but also about where a market sits in its growth cycle.

How Location Influences Investor Returns

For investors, location impacts:

  • Rent Growth Potential: High-demand corridors can sustain stronger annual rent increases.

  • Tenant Retention: A “sticky” location near ports or interstates makes it harder for tenants to relocate.

  • Liquidity: Well-located properties attract more buyers, improving exit strategies.

  • Risk Management: Properties in strong logistic corridors are more resilient during economic downturns.

We explored this in more detail in How to Evaluate an Industrial Property for Long-Term Investment, where location analysis plays a central role in underwriting.

Balancing Location and Strategy

While prime locations near ports or major metros are highly desirable, they can also be expensive. Many investors are finding opportunities in “second-tier” locations that balance cost with access—close enough to major demand centers but with lower operating expenses. The key is to evaluate:

  • How does the location align with tenant needs today?

  • Will infrastructure or population growth increase its strategic value tomorrow?

  • Are there risks (congestion, labor shortages, climate vulnerabilities) that could undermine location value long-term?

Conclusion

Location is the cornerstone of industrial real estate value. The right site can provide a durable competitive advantage to tenants and generate steady returns for investors. Whether near a port, at a highway crossroads, or in a fast-growing secondary market, properties that deliver logistical efficiency will remain in demand—even as market cycles shift.

At Commercial Group, we help clients identify locations that not only work for today’s operations but also anticipate tomorrow’s opportunities. For a tenant’s perspective, check out What Tenants Look for in Industrial Properties.