Bill Lindeke’s How Should Cities Value Industrial Land? started a great conversation. He finds contradictory information from different sources and wonders whether they are reconcilable. One report finds industrial land use as one of the most productive land uses in a city, yet tax value per acre shows a different story. Which is right?
Both points can be right. Property tax data show the real debate is not between industrial and nonindustrial property, but between two different building patterns. Industrial land uses built much of downtown Minneapolis and St. Paul, so these land uses seem very productive. In fact many of the warehouses in downtown Minneapolis from the turn of the last century are now protected historical sites and are filled with condos. On the other hand, much of the current industrial land in cities is filled with newer buildings that sprawl to match their neighbors in the suburbs. I compared two industrial buildings in St. Paul which show building form and type matters more than land use type when determining values.
139 Eva Street
The first site is within the West Side Flats rezoning project at 139 Eva Street; the site is 9.62 acres. It is easy to see from this satellite image that much of the land is used for parking and shrubbery rather than industry. I’m guessing about 50% of the land is used for non-productive purposes. It was built in 1971.
480 Broadway Street
I looked for a multistory industrial building within the project, but instead found a small 1-3 story warehouse on the other side of downtown St. Paul; it is at 480 Broadway St. and is .96 acres. As you can see in the image, very little of the land is non-productive space, maybe 5%. It was built in 1927.
Value compared
Comparing the value of the warehouses side by side reveals some interesting results. Property tax information from the Ramsey county database let me calculate the property tax value per acre (just like the map by Scott Shaffer in Lindeke’s article) showing a stark difference. Even though the 480 Broadway parcel is much smaller, it is 4 and a half times more valuable per acre. The property database also includes finished square feet. I also calculated the value per finished square feet. Here is where the results get interesting. The property at 139 Eva st. is more valuable per sq ft., though by a smaller margin than the difference in value per acre.
The results show that industrial land can still be a valuable part of the land portfolio of cities, but that its form must change (giving another demonstration of Strong Towns’ “Taco John’s Math”). A good start would be to zone industrial land such that it can’t waste land in unproductive ways. A better step would be for industry leaders and city governments to work together to find innovative new ways to build new dense and multistory industrial buildings. Then, maybe, in a hundred years they will be converted to condos.
how did you get a photo of the already-built not-yet-built Saints stadium?
my next question: is there actual industrial demand for the smaller footprint style industrial building other than being rehabbed into a kettlebells studio?
My guess on the first one is a model in google earth?
Nope, it’s the real deal. Google’s updated satellite imagery is from October 2014. As you can see, the area outside of the ballpark is still very much under construction.
If multi-story industrial buildings were viable nowadays you’d see at least some of them being built, and they’re not, and most of the ones that exist are being converted to other uses. In these days of the global economy US businesses have to be as efficient as possible to be competitive, which means low cost land near a freeways, single story buildings for ease of moving product. Having an open area around the building means they can expand without having to move, which is more complicated for a business than throwing your stereo into a box. With suburban development patterns being what they are nearly everyone will have to drive.
Whether such industrial development still belongs in St. Paul in general, or next to downtown specifically, is a fair question. The city obviously sees value with having industrial jobs available to residents. I have no opinion on the mattter. I’d assume most of these companies would pack up for the suburbs if the city forced them to move into a cute but inefficient building.
It may be less a question of viable and more of ‘not as profitable.’ It seems like industrial uses love low-density developments on low-value land because it’s dirt cheap to buy and build. Denser apartment buildings have always been ‘viable,’ but building brand new single family homes over farm country is just way cheaper (or rather the amount of markup/profit is way higher because of how cheap they are to build). It’s about maximizing profits, not about whether something is necessarily able to turn a profit at all. Maybe it’s time to focus our land use on some factors other than maximizing profit for private entities.
That’s kind of a distinction without a difference. If you reduce profitability, some marginal amount of activity will not happen.
We need to reorient our economies such that maximizing profits isn’t the basis of our economy. We need an economy that functions when when profits are low and not the sole determinant of economic development.
I think you’re probably right in that in most cases this is not competitive / viable from the business’s perspective, which is why most U.S. cities have very little industry left within the urban core. I also think Elliot is right that denser land uses like that at 480 Broadway provide a much higher value per acre and return on public infrastructure investment. There’s a good case to be made (Strong Towns has been making it pretty convincingly for years now) that many existing low-value-per-acre uses hit a point where the long term ROI for municipal governments is actually negative. We should not be investing public money to facilitate land uses with a negative return, no matter how much private industry would like us to do so.
The bigger context here is that a company’s decision as to the most efficient way to structure its operations is made in the context of subsidies and incentives established by government, not in a vacuum. So when you say industry requires “low cost land near a freeways, single story buildings for ease of moving product,” that’s true in part because they can benefit from a massive public subsidy by choosing that option. If we hadn’t poured public investment into freeways and other infrastructure serving low-density sprawl, I suspect we’d see industrial corporations making very different choices about the form and location of their operations.
Now, you can argue, I suppose, that if we didn’t subsidize sprawl, or at least sprawling industrial uses, American industry would be worse-equipped to compete with that of other countries. I’m not inclined to believe that, since U.S. cities are almost uniquely low-density and car-dependent, certainly far more so than those of countries like Germany and Japan that strike me as our major industrial competitors, and relying (I’m guessing) more on rail and less on freeways doesn’t seem to be hurting Germany or Japan. But this is a complicated argument that I realize has aspects well beyond the realm of urban planning, and beyond any expertise I can claim.
Ever wonder why there hasn’t been any new general purpose multistory industrial buildings in the last 40 years? The biggest obstacle is the underwriting process. Most fire departments are not equipped to fight fires in massive multistory buildings. Companies working to be competitive would need to see a real bump in productivity to cover significantly costlier insurance.
Multistory defies what most production and distribution companies and their vendors expect to see in a building design. Having to find solutions that the market place does not already offer, and to hire or train people who are not familiar with the configuration would be challenging.
There are examples of manufacturers in dense cities like New York. I know of a distributor that has a facility in Lower Manhattan. But their building is for sale, the real estate is worth far more than the business.
Cities like industry because it creates tax-revenue without requiring much in the way of city services.
So insurance redlining is STILL ruining our cities? ):
Actually I had a weird thought … a lot of industrial buildings rely on railroad or highway access, right? Well back in the day before we were terrified of grade-crossings with railroads, they went right up in through the buildings and streets. These days if there’s a rail line anywhere near something you’ll probably have an overpass and most other crossings blocked off, which really limits access and generally increases distances necessary to reach it–which kind of ends up mandating a car to get there. Highways by design are pedestrian unfriendly, so ditto for highways. Maybe I’m way off base, but it was just a thought.
What role does transportation play in making exurban vs urban industrial sites more viable? Exurban sites are completely dependent on roads and trucks to move both their workers and their materials, whereas in contrast St. Paul’s west side flats have access to railways, ports, highways and an airport. Plus, they have a central urban location providing walking and transit options for workers. Is that enough to overcome the “inefficiency” of the buildings themselves? I don’t know, but if high-density urban industrial is going to ever make a comeback it would be in St. Paul.
Let’s clarify what we mean by”industrial” in this thread: warehousing and distribution. The comparison provided is between a 1927 and 1971 building.
In 1927 distribution meant unloading (with manual labor) box cars, warehousing the materials, and then assembling orders for local delivery. There was no containerized cargo or forklifts, both were developed after WW II. The technology used was the railroad (so you needed a small amount of real estate to allow 4′ 8″ rail access for a rail siding), the elevator, and the delivery truck (requiring a few loading docks for manually loading the delivery trucks).
We didn’t have 40′ tractor trailers, interstates, or intermodal transportation of any kind. Multistory buildings were an efficient and economical way to warehouse goods in this technological scheme because some of the labor could be performed by elevators. Urban locations, with access to low cost labor, were desirable.
By 1971 materials are more likely to arrive by 40′ container than box car, and the containers (or box cars) were unloaded by fork lift, with goods on pallets moved around a single story warehouse. This reduced the need for labor and sped up handling of goods. It also meant multistory urban warehouses without room to maneuver 40′ tractor trailers and good highway access were obsolete. Anything over one story was unnecessary in this technological scheme because elevators slow down the movement of goods by forklift. That’s why today the 1971 building is worth more per square foot than the 1927 building.
Today, almost no warehoused goods travel by rail car, everything is containerized. So If you want to handle goods you need many more loading bays and paved areas to maneuver and store the containers. If you need to unload the container (not as common today as 40 years ago), you need a one story building, and forklifts.
If you want multistory warehouses in urban areas you need to invent a new technology for handling goods, not blame zoning, banks or insurance companies.
Since the present containerized system (which allows goods to be shipped by ship, train or truck without unloading them) is extremely efficient from a labor standpoint, it is unlikely that warehousing is going to again become an urban core, high density use anytime soon. So warehousing doesn’t belong in urban districts anymore, it belongs in low cost land areas with good highway access (railroad access is a plus, but not required).
That is true to some degree on the retail end too, especially for bigger stores. Goods often come by semi on shrink-wrapped pallets. If a building doesn’t have a loading dock, it can be a pain (ie labor intensive, more costly) to receive shipments.
Also, the shift away from rail is happening on both ends. Companies figured out they could save money with just on time delivery from trucks rather than accepting and warehousing a boxcar full, and could buy cheaper land that was not necessarily of the limited supply with railroad access. Railroads figured out they could make a lot more money hauling unit trains of commodities from point A to point B instead of random boxcars of widgets from points A, B and C, to points X, Y,and Z.
Monte,
Railroads still make lots of money delivering non-commodity goods, it just doesn’t happen with boxcars.
Intermodal is a huge moneymaker for railroads, particularly for goods made in Asia. The goods are loaded in containers (on a chassis) where manufactured, driven to a port where the container is lifted off the chassis and loaded on a ship (or stacked for later loading). When the ship gets to a US port (probably Long Beach,CA) it is lifted off the ship onto a chassis and driven to a freight yard where it is lifted off the chassis and put on a train. The train delivers it to a local depo where it is lifted off the train and back onto a chassis, it is then driven to its final destination. Chances are good anything you buy manufactured in Asia spent some time on a train. Even California produce is using intermodal to get perishables to markets across the US.
It sounds like a lot of moves, but because the goods are never trans-loaded the railroads can compete with over-the-road trucking for price and speed.
OK, too long. The technology of transporting and handling goods s going to determine the location and structure of how we warehouse those goods. Today’s technology requires cheap land and lots of pavement. Access to labor is not a significant factor.
Cities should pursue industrial activities that require access to flexible, high skilled labor. That is not warehousing.
thanks for the great info. for the record, a lot of the uses in StP’s west midway area (by hwy 280) is for warehousing, but the one business i know about on the flats (off robert and plato) is a beverage container factory, pop cans or something.
In Minneapolis, anyway, Industrial zoning districts are among the most permissive in terms of building form. They have no minimum yard requirement unless adjacent to residential zoning. Perhaps some yard maximums should be added to the code, along with minimum fenestration requirements (I think these may be in the Minneapolis code now, or anyway are strongly encouraged by CPED). Additionally, something must be done about parking lots. While rooftop parking is likely expensive, it would go a long way towards improving the land use efficiency of industrial structures. Maybe it would be less expensive to merely require the parking lot be enclosed, since these structures likely already have the required ventilation to accommodate heavy truck loading & unloading?
You are right that fixing parking lots would go a long way towards increasing the value per acre of industrial production. Rooftop parking seems like a good solution.
The other thing to note is that newer 1 story industrial warehousing probably has higher ceilings than older industrial warehouses, maybe closer to 2 stories. That increase in height, plus the removal of parking could make 1 level industrial warehousing reasonably productive in urban areas.
are there any examples of 1-story rooftop parking in the twincities? i can’t think of any. i first saw that in Portland.
The only one that comes to mind immediately is a 20s era warehouse at the corner of 12th & Yale in downtown Minneapolis. I assume that concrete framing is required to support rooftop parking and that most new industrial construction is steel, but I could be wrong about both aspects (and hope that I am).
I think it was a car dealership, as it’s part of the surrounding automotive historic district.
Bill, the CVS building at the NE corner of Dupont and Lake Street was originally built as a car dealership, it still has part of the superstructure/ramp that took cars to the roof for parking. It sat idle for years and when it was redeveloped as retail in the 80’s the developer could not get approval from the City to park cars on the roof without performing major work the developer did not want to do.
In many of the older industrial (not warehousing) buildings, production still only happened on the first level. Floors two and three were used for management of the production, retail, management, etc. My guess is that as the scale of companies has increased the management of industrial production has been physically separated from the places of production. Relocating management to the location of production will likely need to be a part of viable urban industrial production.
Elliot,
The Ford Center by the Twins stadium was constructed to be an assembly plant, work started at the top and the cars wound their way to the ground level as they were assembled. The ramps are still there if you visit. I think its over ten stories.
Steven,
That is a great, and extreme, example of multistory industrial production. What a great building that was left behind! Thanks for the example.
I do not have a background in industrial production of architecture so I have little idea of what it would take to again built like that.
The building has been through major renovations in the last few year. I’m not sure whether the ramps are still there, but I’ve never noticed them.