Series on Costs of Running
Cost of Industrial Labor in the I-94 North Corridor
Labor is one of the most expensive inputs for all of my clients. In fact it represents on average 40%-50% of the cost to run a plant or distribution center annually and real estate typically represents less than 7%. It’s an important input to consider when I’m working with businesses because it drives decision making more than the price of real estate. With the unemployment rate so low making sure there’s enough people nearby with the skill set you need is an equally important and usually drives the site selection parameters more than the cost of the building itself.
Here is a little snippet of the type of analysis that we do when representing industrial businesses in both Chicago and around the country, all figures are based on a 30-minute drive radius from the location cited. For this example I used the I-94 industrial corridor to show geographic differences.
Production Occupation Labor Availability, as % of Population, Median Hourly
Niles: 2.82%, $16.94
Wheeling: 2.51%, $16.86
Lincolnshire: 2.65%, $17.44
Libertyville: 3.27%, $17.42
Waukegan: 3.12%, $17.51
Old Mill Creek: 3.73%, $17.14
Zion: 4.11%, $17.23
Pleasant Prairie: 4.26%, $17.54
Transportation/Material Moving Labor Availability, as % of Population, Median Hourly
Niles: 3.25%, $16.16
Wheeling: 2.67%, $16.03
Lincolnshire: 2.65%, $15.16
Libertyville: 2.82%, $15.27
Waukegan: 2.76%, $15. 35
Old Mill Creek: 3.08%, $15.18
Zion: 3.44%, $15.09
Pleasant Prairie: 3.47%, $15.50
The above analysis is a small piece of what goes into our Site Selection Matrix to help companies analyze their true occupancy costs over a 10-year period. For a 100,000 SF facility operating with 100 full time production employees it’s easy to see how $1 per hour differences in labor cost result in an additional $200,000 per year in overhead. There are very few scenarios where the extra $200,000 in labor inputs is justified by reduced rental rates of $0.50-$1 PSF which is the range most rents fall into for modern buildings in the I-94 Corridor.