Rail-Served Industrial Facilities: A Growing Opportunity in Industrial Real Estate

Edison Vasquez
Jun 24
4 min read

Rail-served industrial facilities are specialized properties that have direct access to railway lines, allowing for efficient loading and unloading of goods directly from railcars. These facilities play a crucial role in the supply chain, offering businesses a cost-effective and environmentally friendly alternative to traditional trucking for transporting large volumes of goods over long distances.

The Rise of Rail-Served Industrial Properties

In recent years, rail-served industrial sites have become increasingly attractive investment opportunities. This surge in demand is driven by several factors:

Cost Savings: Rail transportation offers significant cost advantages, especially for long-haul, bulk volume shipments. Companies can reduce fuel costs and distribute shipping expenses over larger volumes.
Reliability: Trains are less susceptible to traffic congestion and weather delays compared to trucks, providing more predictable transportation schedules.
Sustainability: Rail is considerably more fuel-efficient than trucking, moving one ton of freight nearly 500 miles per gallon of fuel on average. This eco-friendly option aligns with many companies' sustainability goals.
Safety: Rail transportation boasts a better safety record than trucking, with fewer accidents per ton-mile.
Limited Supply: New rail lines are seldom constructed, making existing rail-served sites valuable assets. The scarcity of these properties contributes to their investment potential.

As supply chains continue to evolve and sustainability becomes increasingly important, rail-served industrial facilities are well-positioned to meet the changing needs of modern industry.

Key Considerations for Rail-Served Industrial Properties

When evaluating rail-served industrial facilities as investment opportunities, several crucial factors come into play:

Location and Accessibility

The site's proximity to major transportation routes, highways, and intermodal facilities is vital for efficient distribution and multimodal connectivity. Access to customers, suppliers, and key markets should be carefully considered.

Infrastructure and Development Costs

Establishing a rail-served industrial site often requires significant infrastructure investment. This may include constructing rail spurs, connecting to existing rail lines, and ensuring compliance with safety and operational regulations. Investors must carefully evaluate these costs and assess their long-term viability.

In land constrained markets such as South Florida, the development of rail served warehouses is challenging and non-existent. The high cost of land, pushes developers to maximize lot coverage with building, leaving no room for rail spurs. Additionally, in this market, there is not a significant premium in rents for rail served warehouses. However, it’s a feature that will help Landlord’s differentiate from the rest of the market.

Rail Service Providers

The quality and reliability of rail service providers are crucial. Sites with access to multiple Class I railroads or short line railroads that interchange with multiple Class I carriers can offer more flexibility and competitive rates.

Site Characteristics

Key site features to consider include:

Size and expandability
Topography and soil conditions
Utility capacity (electricity, natural gas, water, sewer)
Environmental considerations
Zoning and permitted uses

Operational Efficiency

The layout and design of the facility should optimize rail operations. This includes considerations such as:

Adequate track length for efficient loading and unloading
Proper finished floor elevation for dock-height rail car access
Efficient circulation paths for forklifts and other material handling equipment

Regulatory Compliance

Navigating the complex regulations and obtaining necessary permits for rail-served sites can be challenging. Investors should be prepared to engage with railway companies, local authorities, and other stakeholders to ensure compliance.

Rail-served industrial facilities play a crucial role in the supply chain, offering businesses a cost-effective and environmentally friendly alternative to traditional trucking for transporting large volumes of goods over long distances.

Investment Potential and Market Trends

The demand for rail-served industrial facilities is on the rise, driven by several factors:

E-commerce Growth: The boom in online retail has increased the need for efficient distribution networks, making rail-served facilities attractive for large-scale logistics operations.
Supply Chain Resilience: Companies are seeking to diversify their transportation options to mitigate risks associated with trucking shortages and rising fuel costs.
Sustainability Initiatives: As businesses focus on reducing their carbon footprint, rail transportation offers a greener alternative to long-haul trucking.
Manufacturing Reshoring: The trend of bringing manufacturing back to the United States has increased demand for industrial facilities with robust transportation options.

Challenges and Opportunities

While rail-served industrial properties offer significant potential, investors should be aware of challenges:

Limited Availability: The scarcity of suitable sites can make acquisition competitive and potentially drive up prices.
High Initial Costs: Developing or retrofitting properties for rail service can require substantial upfront investment.
Long-term Commitment: Rail-served facilities often cater to specific industries or tenants, potentially limiting flexibility for future use.

Despite these challenges, the unique advantages of rail-served industrial properties make them attractive long-term investments. As supply chains continue to evolve and sustainability becomes increasingly important, these facilities are well-positioned to meet the changing needs of modern industry.

Ultimately, rail-served industrial facilities represent a compelling opportunity in the commercial real estate sector. Their combination of cost-effectiveness, reliability, and sustainability aligns well with current market trends and future economic projections. However, successful investment in these properties requires careful consideration of location, infrastructure, operational efficiency, and regulatory compliance. For investors willing to navigate these complexities, rail-served industrial facilities offer the potential for strong, stable returns in an evolving industrial landscape.

The Industrial Team at ComReal has extensive experience in Rail Served warehouses in Miami and all South Florida. The team has successfully helped users and investors in the leasing and sales of these facilities. Contact the team for current availability of rail served warehouses and the status of this market.