Why do warehouses decentralize more in certain metropolitan areas?

Abstract

Over the last decade, warehousing and distribution centers have decentralized to the urban peripheries where land is cheaper and readily available. This change in location patterns has been driven by the demand to build more modernized and larger facilities to accommodate an ever-increasing influx of freight. Since efficient freight movement is essential for the smooth functioning of metropolitan areas, decentralization should occur everywhere. However, this is not necessarily true. It is hypothesized that depending on the volume of goods movement and the spatial distribution of land prices, the extent of decentralization varies across metropolitan areas. This hypothesis is tested using 48 US metropolitan areas. Results provide robust evidence that high land prices push large warehouses away from central locations. When freight demand and land prices are not as high, the effect becomes insignificant. Indeed, not only is decentralization linked with large metro areas but also with very large warehouses.