Tuesday, January 07 2020
By Jack Mazurak, Kentucky Cabinet for Economic Development
Better than any other state, Kentuckians may argue, the Commonwealth knows rapid-speed advanced manufacturing, fast food, faster cars, overnight global package delivery and a huge range of instant services from oil changes to stock trades.
So does it seem an irony at the pinnacle moment of human progress that so much of Kentucky’s success stems from its most stationary attribute? Strange, but true.
Much of Kentucky’s automotive and general manufacturing scene, its air cargo dominance and its overall appeal as a place from which to do business comes from exactly that—its place in the U.S.
Sure, the Bluegrass State is the home of the all-new, mid-engine Corvette, one of the fastest American-built cars by top speed and 0-60 mph times. Kentucky hosts fast food headquarters of KFC, Taco Bell, Pizza Hut, WingStreet, Papa John’s, A&W and Long John Silver’s. Its three air-cargo hubs are a backbone of the online commerce era. A nationally outsized portion of manufacturing per-capita operates in Kentucky and the state boasts widely known brands including Holley Performance Products, Wild Turkey Valvoline, Jim Beam, Humana, Computershare and Kindred Healthcare.
But Kentucky’s location makes it a gateway between the American South and Midwest. It is within a day’s drive of two-thirds of the U.S. population and is situated at the center of a 34-state distribution area.
Kentucky’s geographic position affords natural advantages for the distribution goods and materials to massive industrial and consumer markets. Kentucky’s borders lie within 600 miles of approximately 65 percent of the nation’s personal income and manufacturing facilities.
Those key factors make all the difference when it comes to quickly moving products, meeting with customers or close a sale.
In terms of infrastructure, Kentucky is well-served by 20 interstates and major highways, rail networks, barge traffic on the Ohio and Mississippi rivers, five commercial airports and dozens of regional airports. The state’s transportation network can move products easily and efficiently by air, rail, road and water to all points globally.
Kentucky’s three air hubs by UPS, DHL and Amazon have the state poised to take the top spot nationally in air-cargo shipment volume. This strong presence by the world’s most prestigious logistics companies means products manufactured in Kentucky can get anywhere in the world virtually overnight.
In Louisville, UPS operates the Worldport Air Hub and the Centennial Ground Hub, both of which are growing. In October 2019, UPS announced $750 million in projects over the coming years and 1,000 new jobs to support Worldport. That followed a May 2019 celebration marking completion of a $310 million Centennial expansion. The project roughly doubled Centennial’s sorting capacity and added additional sorting automation equipment. The UPS expansions are in response to increased demand from both eCommerce and traditional retail package shipping.
DHL Express ships more than 250,000 packages per day to more than 220 countries and territories around the world from its air hub at the Cincinnati/Northern Kentucky International Airport. The company recently completed a $108 million expansion of its Kentucky hub, one of only three such DHL operations worldwide. The work allowed DHL to grow its aircraft fleet and international express volumes.
Jeff Bezos flew to Kentucky in May to break ground on Amazon Air, a $1.5 billion shipping hub at the Cincinnati-Northern Kentucky International Airport. The 2,700 job, approximately 2.6 million-square-foot sorting facility will help reduce Prime delivery to one day when it opens in 2021. It is Amazon’s only air hub. As this facility comes online, the state will in all likelihood move from the second-leading spot in air cargo shipment to overtake Tennessee as the first.
Kentucky’s total logistics and distribution industry accounts for nearly 75,000 jobs and includes almost 550 facilities. Given Kentucky’s natural advantages – including a stable, predictable climate not subject to debilitating snow or hurricanes, and its proximity to North America’s largest markets – the outsized industry is no surprise. As well, manufacturers of all varieties continue to locate and expand in Kentucky thanks to those – and other – infrastructure and logistics advantages.
Increasingly, small and mid-size companies cite Kentucky’s cost of living as a compelling factor, especially as the Cabinet markets the Commonwealth in high-cost states and metros like California, Chicago, Boston and New York.Numbers back up that trend.
Kentucky ranked 13th nationally in a recent affordability assessment by U.S. News & World Report. That analysis considered each state’s cost of living and housing affordability. The latter was a comparison of median family incomes and mortgage interest rates.
Target states for Kentucky’s marketing efforts include Massachusetts, ranked 46th, New York at 47th and California, which ranked 49th nationally.
Diving deeper into the numbers, Kentucky’s cost of living – at 14th best in the nation – and its housing affordability at 13th best – achieved near parity while ranking well into the top third of states.
Louisville, the state’s largest city, had a median home value of $146,900 in 2017, according to the U.S. Census Bureau, and a median monthly gross rent of $779. That compares to Nashville with a median home value of $191,400 and median monthly gross rent of $970.
Many Kentucky cities offer a reasonable cost of living combined with a strong quality of life and sense of place. For example, Owensboro, Kentucky has long offered an agricultural and industrial home base for businesses looking to locate along the Ohio River. But Owensboro’s recent $270 million downtown revitalization initiative and Riverfront Master Plan has made the city of nearly 60,000 a cultural hub for Western Kentucky. The project includes the Owensboro Convention Center, two hotels, the International Bluegrass Music Hall of Fame & Museum and Smothers Park – which takes full advantage of the riverside. The city boasts three spray parks as well as Kentucky’s only municipal ice arena for year-round skating.
Owensboro and other Western Kentucky cities are already benefitting from new Interstate designations made in the past few years. I-165 links Bowling Green, Kentucky – home of the Corvette assembly plant – on the south end to Owensboro, 70 miles to the north, along what was previously the William N. Natcher Parkway. The section gained its designation in March 2019 making it the first Interstate in Owensboro.
Further west, the I-169 corridor connects Hopkinsville, Kentucky on its southern end to an interchange 34 miles north with its parent highway, I-69 near Nortonville, Kentucky. That stretch, formerly known as the Edward T. Breathitt Pennyrile Parkway, was designated as I-169 in 2017. When upgrades are complete, the section will link Interstates that provide grade-A transit from Flint, Michigan to Nashville.
Hopkinsville sits at the center of a three-county region served by the South Western Kentucky Economic Development Council. Trigg, Christian and Todd counties together offer two Build-Ready Certified sites, multiple pad-ready sites in business parks, industrial buildings and quick access to a Novelis aluminum plant under construction in Todd County.
The $300 million, 125-job Novelis plant is scheduled to open in 2020 and will heat treat and pre-treat automotive grade aluminum coils produced at the nearby Logan Aluminum rolling mill. With automakers increasingly turning to aluminum to lighten, improve fuel mileage and lower emissions from their vehicles, the region will continue to draw interest from automotive and related industries.
Judging by its logistics and distribution infrastructure growth, its favorable cost of living and the state’s key location, Kentucky will continue to attract development at a fast pace for decades to come.