Md. needs the large warehouses, and other new businesses as well

The Outlook

April 28, 1996|By Kevin McQuaid

The decision by office super-store chain Staples Inc. this month to locate a $43 million distribution center -- and its 700 jobs -- in Hagerstown was the latest in a string that underscores Maryland's emergence as a premier distribution site. But to lure Staples, Saks Fifth Avenue, the Fritz Cos., Supervalue Inc. and others, the state has provided lucrative economic incentives in exchange for jobs that traditionally pay about $8 per hour and often lack significant benefits.

At the same time, developers are beginning large projects without tenants in place to attract prospective distributors, projects that will add in excess of two million square feet of new space at the end of the year.

Is Maryland focusing too heavily on warehouses at the expense of manufacturing or higher-paying white-collar jobs?

Is it putting too many eggs in one basket? And are too many of the so-called speculative warehouse developments being planned without regard to demand?

James T. Brady

Md. Dept. of Business and Economic Development

I'm not sure what the upper limit on the number of distribution centers would be. That we're winning these high-profile projects is the result of our geographic advantage, because we are located in a perfect place for the distribution industry. We have location and access to a large percentage of the U.S. population, and the growth of the industry hasn't played to a conclusion yet.

Are they top-end jobs? No. But with Staples, for instance, they're attractive jobs with benefit packages. I'm not the least embarrassed about getting those jobs. The state needs jobs like that.

Do we want a state where this is all we have to offer? Of course not. But in this area, where we have considerable advantages, we should take advantage of them.

J. Richard Latini Vice president,

Colliers Pinkard

Although warehouse operations traditionally have not been viewed as important economic engines, keep in mind that some companies come here with distribution operations and expand. Goldwell Cosmetics is a perfect example of that phenomenon. They started with a small distribution operation, it grew, and they recently opened a new North American headquarters and manufacturing facility in Linthicum. Many companies will use warehousing as an entry into a market, as a way for government and other businesses to get to know them, and it leads to other business.

And as far as all the new product coming on line, remember that the warehouses of the 1970s are not the warehouses of the 1990s. They're not just bulk, dead storage buildings. Today we have state-of-the-art facilities that contain millions of dollars worth of high-technology equipment. The employment intensity is higher, the skill levels higher, and as a result, the economic impact is greater.

I don't see the potential for overbuilding of warehouses yet. The market demand currently out there should support the buildings that are expected. But too many projects do present a problem. If a recession hits, then the tap turns off immediately for the warehousing industry.

Richard M. Alter

Chief Executive Officer, Manekin Corp.

Distribution buildings are part of the range of real estate products and employment situations the market here offers. I can't say the state is over-emphasizing distribution centers as an economic engine. The state, I believe, now sees them as a benefit, and has been aggressive in luring those that make sense.

The reason there are so many speculative projects now being planned is that the suppliers of capital view them and the state as a solid investment that will produce good returns. But I think we're approaching an area where we're leaving the safe zone in terms of how much new product can be absorbed at one time.

Bill Schweke

Program Director, Corporation for Enterprise Development

The issue with distribution jobs is always the rate of return for the jurisdiction. It should always be, over a reasonable period of time, that the state or city gets adequate tax revenues in exchange for what they've provided in financial incentives. A lot of states are so responsive to new job announcements, or are so sensitized to losing or being perceived as unresponsive, that they fail to examine whether or not a prospect is a good one in terms of what they'll generate longer-term.

In Maryland, the traditional economic motors have been running out of petrol. The question is whether distribution centers represent a new engine for growth. Do they meet the goals of the type of employment that Maryland seeks, and do they fit in with a larger strategy? I don't think Maryland has an abundance of distribution operations, but there is a danger when any state relies on one type of employment growth to boost its economy.

Pub Date: 4/28/96

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