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Inward Investment Guides

Highway Access/Frontage Still at the Top

Although the nature of business has changed through the years, highway access and frontage still rank high among site selectors.

Dan Calabrese (Nov 09)
In survey after survey concerning the reasons companies choose a given location, one factor has remained at or near the top for decades as a positive choice: highway access/frontage.

Companies never get tired of being visible to thousands of motorists on a daily basis, nor do they stop appreciating easy access to trucking and employee commuting routes. Land investors have long understood that an investment in highway-fronting properties - while it may not pay off immediately - will almost always pay off eventually.

But the world does change as decades go by. And while highway access and frontage continues to rank high as a location consideration, it's worth asking whether the reasons for this appeal are the same as they were 20 or 30 years ago.



Changing Nature of Business
You will be hard-pressed to find anyone who sees highway access/frontage as anything but a positive, particularly in the industrial sector. But as the speed of life and the speed of business have accelerated over the past few decades, the highway has taken on different forms of importance for some companies.
One major change in the nature of business logistics concerns many companies' warehousing strategies. Whereas many firms once operated a single, large warehouse adjacent to their main manufacturing facilities - thus heightening the importance of adjacent highways - warehousing and distribution is often more dispersed today.

For Canton, Michigan-based American Yazaki Corporation (AYC), part of an international automotive parts manufacturing company, its choice in the 1980s of a site along Interstate 275 was driven in large part by its decision to site manufacturing and warehousing together on a single campus.

At the time, AYC even secured a commitment from Wayne County to expand adjacent Warren Road from two lanes to four lanes with a center turn lane - a crucial move for the facilitation of heavy truck traffic. But today, facilitation of truck traffic at this site is not as important as it was when AYC first moved there.

"At that time, most of AYC's warehousing was in Canton," said Kurt Zielske, vice president of engineering for AYC. "Today, this is not the case. Most warehousing is in regional centers, with only support for local auto plants."

However, Zielske says AYC still enjoys crucial benefits from the visibility I-275 frontage provides, particularly in automotive-oriented Metro Detroit, where auto executives drive by AYC's facilities by the thousands every day.

"The more important value is being close to a wide range of customers in the Detroit area and the name recognition [afforded by] being just off a major freeway, where our company's name can be displayed and recognized," Zielske said.

Dan Frankel, a senior managing director with Cushman and Wakefield based in the Boston area, said increasingly congested traffic may have ironically lessened the value of highway frontage in some locations - sort of like that restaurant no one goes to anymore because it's too crowded.

 "Don't forget, time is money," Frankel said. "Everybody's trying to reduce the cost of the supply chain. If they have a truck sitting idle in traffic, it uses more gas, and they have to pay the drivers more time to sit in traffic.Theoretically, yes, when it gets down to it, any company wants to be on the highway. But when you look at retail versus industrial, with retail, the more congestion, the more they like it. Industrial wants to get on and off."

Accessing Customers and Employees
But the business world's growing expectation of quick delivery has turned Upstate New York's Interstate 86 into a major business-builder for Olean, New York-based Dresser Rand, a manufacturer of compressors and steam turbines for the petrochemical industry - machines that can only be moved with very large, special tractor-trailers.

Dresser Rand has been at its current location in Olean since long before I-86 was built. Since the highway came through, the company has been able to keep up with growing pressure from customers.

"The speed of response expected by clients has increased both in terms of expectations and delivery," said Dan Wallace, Dresser Rand's director of human resources for North American operations and primary spokesman.

Because of its now-established access to I-86, Wallace says Dresser Rand has been able to more efficiently expand on a global basis. Ironically, one area the company is not able to service as well as it would like is Buffalo. That is why Dresser Rand is pushing hard for the completion of U.S. Route 219, a spur of U.S. Route 19 set to go through the Olean area and service Buffalo. And U.S. 219 is important to Dresser Rand not only for logistics considerations.

"Dresser Rand is pushing to have 219 put in because, from a business perspective as well as from an employment perspective, having easy access to a larger airport or a larger residential area is influencing how we recruit individuals," Wallace said. "If you say it takes an hour-and-a-half to get to Buffalo, that could be a downside. If you say it takes 45 minutes, that makes a big difference."

John Sayegh, former director of economic development, planning and tourism for Cattaraugus County, New York, remembers when Dresser Rand's machines would get stuck in the middle of the road because, in pre I-86 days, local roads simply couldn't handle the weight of the machines and the tractor-trailers required to transport them. Other companies have also been attracted to the area by the highway's completion, Sayegh said.

"We are in the process of remediating 62-plus acres that Exxon Mobil owns in the city of Olean," Sayegh said. "This is opening up that property to major commercial development. We had nine developers interested in locating on that property once it is remediated. And it's being done as we speak."

Sayegh said companies interested in Olean sites usually ask first how close the site is to I-86, particularly a trucking company that is currently looking to set up a distribution center: "We know how important it is for a distribution center to be close to the highway," Sayegh said.

Of course, the nature of distribution centers has changed over the past several decades, as the example of American Yazaki Corp. demonstrates. But that only means that the importance of highway access/frontage, while different in some ways, is as pronounced as ever.

Note: Highway accessibility has consistently ranked first or second in importance among the site selection factors ranked by the respondents to Area Development's Annual Corporate Survey. The 2009 survey results will be published in the December 2009/January 2010 issue.

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