How transportation shapes industrial real estate values

More trucks on the road means increased warehouse value, right?

In the real estate industry, this is widely accepted. It is believed that when there are more trucks on the road transporting goods, the value of industrial real estate, such as warehouses, increases. 

After 15 years of research, Sherwood Clements, the William and Mary Alice Park Junior Faculty Fellow in the Blackwood Department of Real Estate, has confirmed this already accepted relationship between trucking and industrial real estate.

“This is something that most people would probably believe because they ride on highways and see trucks everywhere,” Clements said. “It’s also basic economics. When there is more demand for goods, the industry needs more real estate space to keep up with that demand.”

This relationship can help investors better diversify their portfolios for both long term and short term strategies. It also can help policy makers address local zoning and land use regulations, leading to infrastructure improvements, economic growth, and regional development.

Clements notes Amazon’s logistics boom as an example. He says that as Amazon and other companies move more goods on the road, they need more industrial property to support the demand. 

In addition to looking into the volume of goods moved by truck, the research analyzes crude oil future prices which offer insight into the expectations of transportation costs. It also analyzes the Dow Jones Transportation Index which tracks stock performance for major freight companies. These indicators give a snapshot of the industry and can help forecast future shifts.

The study used national data from 1988 to 2021 that was taken from sources including the Association of American Railroads, the American Trucking Association, the National Association of Real Estate Investment Trusts, the National Council of Real Estate Investment Fiduciaries, and more. This data was grouped into the east region, midwest region, south region, and the west region of the United States to paint a comprehensive picture. 

Each region was anchored by a major transportation or industrial hub: Harrisonburg, Virginia (East); Chicago, Illinois (Midwest); Dallas, Houston, and Austin, Texas (South); and Riverside and the Inland Empire in California (West). The study also included national-level data for comparison.

These insights were published in the Journal of Real Estate Portfolio Management, and help connect economic indicators to real-world change. Clements’ work provides a lens through which the transportation industry, industrial real estate industry, and investors can grow.