Industrial space demand and freight transportation activity: Exploring the connection

There has been continuing interest among transportation planners, economic development specialists, and private industry about the relationship between the demand for industrial space and the level of freight transportation activity. With the growing importance of logistics and supply chain economics for many industrial and business activities, firms organizing their industrial activities and locating their warehousing and operational centers increasingly must consider the availability, quality, and cost of a range of transportation services, particularly in connection with essential intermodal activities. Accordingly, development of major logistics parks in conjunction with major intermodal hubs has become an important element in the overall industrial economy, predicated on the notion that robust freight activity is a good indicator of demand for industrial space. In this study, using regression techniques, we examine the relationship between freight transportation activity and industrial space demand at the metropolitan area level. The results confirm this relationship, reflecting significant statistical association between higher levels of freight traffic and higher levels of industrial space demand. This relationship is more pronounced in inland versus port markets. In addition, the data reveal that there was a shock to industrial space demand in 2001, thereby altering the structural relationship between demand and the drivers of demand.