STAR-TELEGRAM

North Texas Has Become a Major Player in Distributing Cargo that comes to the United States from Asian Nations

18 September 2006

From North Texas, it isn’t hard to see China. Stop for a train and watch the names of Chinese shipping companies flash past like a slide show. Or see cranes on the horizon putting up formed concrete walls for a new logistics warehouse. Inside, workers will distribute foreign goods across the United States. Americans’ appetite for inexpensive, Chinese-made goods is felt especially by companies in the business of moving them more than 8,000 miles. Those companies are looking for new places to put this cargo, away from the growing congestion at West Coast ports. Dallas-Fort Worth, thanks to its less-expensive rent, central location and large population, is one of the places they’re looking.

“Dallas-Fort Worth as a whole has really grown in terms of a distribution hub,” said Jeff Thornton, senior leasing representative for Duke Realty, who oversees industrial leasing for the Metroplex.

For more than 15 years, the combination of interstate highways, rail connections, Dallas/Fort Worth Airport, a “cargo airport” at Hillwood’s Alliance industrial parks, and BNSF railroad’s giant intermodal hub in North Fort Worth, has ushered in dozens of companies expanding their distribution capabilities. Railroad companies say Dallas-Fort Worth is in a particularly advantageous location because it is directly east of the Southern California ports where most of the Asian goods pass through. Rail is the primary method for hauling large quantities of Asian cargo over long distances, because it is much less expensive. Railroads are laying more track, logistics companies are adding warehouse space, and local companies that buy Chinese goods are flying to China to open lines of communication.

ATC Logistics, a company that offers cellphone fulfillment and repair at Alliance, has been going to China to meet with suppliers, President Bill Conley said. “China is in vogue and probably will be for the next few years,” Conley said, adding that companies are always looking for the best supply sources. Conley said ATC grew 40 percent from 2004 to 2005, mainly by adding customers and moving into new industries. Pacific Rim countries account for 8 of the top 10 importers for air cargo arriving in North Texas in 2005, according to information from the Dallas Chamber of Commerce. Half of the North Texas-bound air imports from the top 10 countries are from China, according to the chamber.

Fort Worth-based BNSF has seen its cargo at the Alliance intermodal hub increase to 600,000 annual lifts from 200,000 in 1994, its first year. Because many companies like to locate near these transportation hubs, the intermodal hub’s growth is also tied to business expansion at Alliance. As these companies expand, they look for other operating advantages. Steve Boecking, vice president of Hillwood Properties in charge of foreign trade zone and logistics, said companies are increasingly requiring their new sites to have the tax advantages that come with a foreign trade zone.

In the past month, logistics companies such as Con-way Freight, DigiSource International, KFS Inc. and MetroActive Warehouse & Distribution have made commitments to larger space at Alliance, by either buying land for larger buildings or adding onto their space. The reason? Asian imports. “This has been the most activity that I can recall,” said David Pelletier, Hillwood spokesman. He said 42 percent of the containers coming to Alliance by rail are from Asia. That number is a low estimate of the total amount of Asian cargo coming to the area, Pelletier said, because there is not a way to measure the origination of cargo that comes to the United States and is reconfigured before moving on to the Metroplex.

In July, Alliance Airport was named the fastest-growing cargo airport in North America by Air Cargo World magazine. Alliance, which primarily receives cargo through its FedEx hub, saw a 28 percent increase in air cargo in 2005. Fort Worth-based BNSF, which generates 40 percent of its revenue from intermodal freight, is also investing heavily in cargo from China. Its North Texas intermodal hub, the fifth-largest in the BNSF system, is at Alliance Airport. The company has an agreement with China’s Ministry of Rail to advise the country about planning efficient rail service and logistics parks similar to Alliance throughout China. Chinese visitors have toured Alliance to study the operations before building their own intermodal yards, said Steve Branscum, BNSF’s group vice president of consumer products.

“The Alliance development is really the first new wave in logistics parks anchored with an intermodal facility,” Branscum said. “That is the model.” In April, the company opened an office in Shanghai. The same week, it hosted more than 400 representatives from shipping companies and manufacturers, Branscum said. The visitors wanted to understand more about the way the supply chain works between China and the United States. The Dallas-Fort Worth area is at the front door of all of this interest, Branscum said.

Geographically, the Metroplex is the closest major metropolitan area to the West Coast ports that serve the rest of Texas. About 75 percent of Asian goods come through West Coast ports, particularly the Port of Long Beach in Southern California. Another positive factor for Alliance is that many distribution companies are consolidating into a few large locations rather than operating a series of smaller warehouses, Duke Realty’s Thornton said.

Not all the extra shipments are coming to Alliance. In coming weeks, the Allen Group is expected to announce a plan to develop a 6,000-acre logistics hub south of Dallas, where a year ago Union Pacific opened an intermodal hub to accommodate the rise in international cargo. Duke Realty, a real-estate investment trust that owns 8 million square feet of space across the Metroplex, had been eyeing the south Dallas area for warehousing for the same reason that Alliance became popular, Thornton said. “I will tell you for the last seven or eight years, a lot of the larger warehouse users have wanted to locate [near D/FW Airport],” Thornton said. “What has happened is that area has become so congested.”

TAIWANESE IMPORTS $21.5 billion

KOREAN IMPORTS $26.6 billion

JAPANESE IMPORTS $84.6 billion

CHINESE IMPORTS $152.2 billion

North Texas cargo, by the numbers

573,252: Number of cargo containers that moved through the BNSF intermodal hub at Alliance in 2005

204,000: Number of cargo containers that moved through the same hub in 1994

42: Percentage of that cargo now coming directly from Asia

220,134: Tons of air freight cargo that Alliance Airport handled in 2005

28: Percentage increase from the air freight the airport handled in 2004

1: Alliance Airport’s rank among North American airports as fastest-growing, as determined by Air Cargo World magazine

SOURCES: BNSF, Air Cargo World

Star-Telegram

Intermodal Hub Draws Companies to Wilmer

18 September 2006

Ever since Union Pacific opened its $100 million intermodal hub off Interstate 45 south of Dallas, Wilmer has been on the global logistics map.

In coming weeks, a major landholder in the area, San Diego-based real-estate developer Allen Group, is expected to announce the development of a 6,000-acre logistics park. The company said the Dallas Logistics Hub has the potential for 60 million square feet of building not just in Wilmer, but nearby Dallas, Lancaster and Hutchins.The company believes that the place is ripe for an intermodal hub because it’s close to the rail facility and it’s perfectly positioned to handle imports from the West Coast and Mexico.

Other companies are also seeing the opportunity for more business there. Duke Realty, Trammell Crow and Prologis are building giant speculative warehouses and distribution buildings nearby.

About 700 trucks come through the Union Pacific hub on any given day, dropping off containers and picking up full ones off rail cars at the 360-acre yard. The yard hits records every month, said Eric Anderson, superintendent of intermodal operations for Union Pacific. It’s a far cry from UP’s old yard in south Dallas, which was so overcrowded that rail containers were sometimes stacked four high.

Union Pacific hopes to make an even larger investment in Asian freight headed inland. The company is considering $3.2 billion in infrastructure improvements this year. Much of that will be used to add a second set of track to the Sunset Route, which comes from Southern California ports to El Paso, and branches from there, said Paul Borseth, Union Pacific’s assistant vice president of international intermodal operations.

The intermodal yard in Wilmer is a colorful place, with giant GPS-guided cranes lifting the 20- and 40-foot metal boxes on and off trains and boxes. But the colors also highlight the prevalence of Asian-based shipping companies at the yard. There are the red containers from Japan-based K Line, the forest-green containers from Taiwan-based Evergreen Marine, gray containers from Chinabased COSCO and the aqua blue containers from China-based China Shipping. Few are non-Asian-based companies.

The boxes almost always contain consumer goods.

“Go to a typical big-box retailer, and much of those items came from Asia,” Borseth said. In recent years, trans-Pacific cargo has risen more than 7 percent a year, with the last couple of years rising as much as 15 percent over the previous year, he said. Borseth said he believes that the trend will continue. He’s not the only one.

Dan McAuliffe, vice president for the Allen Group, said his company, which has been acquiring land south of Dallas for eight years, originally planned a 2,500-acre facility. Now, the plans call for more than double that, thanks to shipments arriving from Mexico and the West Coast.

The Allen Group expects the hub to be built over the next two to three decades, eventually filling 60 million square feet of office, distribution and warehouse space and employing 30,000 people directly and 30,000 more in support jobs. McAuliffe said it’s possible that the Lancaster airport will eventually handle shipments and that BNSF will open its own intermodal facility at the hub.

BNSF spokeswoman Suann Lundsberg said the company is in the early stages of evaluating the possibility. She said intermodal development would be in addition to Alliance.

The Dallas Morning News

Farmland Ready to Produce Industrial Crop Allen Group to Build Hub on 6,000 Acres in Southern Dallas County

16 September 2006

With 6,000 acres of land assembled in southern Dallas County, the Allen Group, a California real estate developer, is now planning to build the first office and industrial space in its logistics and industrial park. The move is expected to boost efforts by local officials and business leaders to create an inland port in the economically depressed area.

Currently, all of the 6,000 acres is farmland. But the logistics park and an adjacent Union Pacific Corp. intermodal rail terminal are situated along key highway and rail routes. These routes are becoming more important, thanks to the boom in trade with Asia.

It took the Allen Group three years and $150 million to $200 million to assemble the land for its Dallas Logistics Hub.

About 65 percent of the land will be set aside for industrial and distribution space, with offices, retail stores, hotels and homes on the rest. The project expects to create a property tax base of more than $2.5 billion as well as 30,000 jobs.

“It’s essentially a very large industrial park,” said Richard Allen, founder and chief executive of the San Diego-based developer.

“Dallas is the gateway to the population centers of the East.”

Later this year, he plans to officially unveil the master plan for the hub. So far, the Allen Group has not signed any contracts with tenants, but it has not yet begun to market the park, Mr. Allen said.Groundbreaking will occur in a few months, he added.

The Dallas Morning News

‘Inland Seaport’ Wave of Future for County

5 September 2006

Southern Dallas County is on the verge of reinvention, the likes of which have never been seen here before.

The first signs of what will happen are already visible along Interstate 45. As you travel south of Loop 12, you can see the stacks of railroad cars peaking above the roadside and the giant warehouses already under construction.

Without a body of water in sight, this broad stretch of farmland is poised to become a seaport.

Officials in four cities – Dallas, Lancaster, Wilmer and Hutchins – are working feverishly to create this “inland seaport” that will transform thousands of acres of vacant land into a distribution hub for Asian-made consumer goods.

These shipments currently arrive in huge cargo containers at Long Beach, Calif., the nation’s second-busiest port. The annual number of containers (6.7million) and the number of vessel visits (5,300) has overwhelmed the port, requiring ships to wait up to eight days to unload.

To reduce the backup, about 60percent of these unopened containers would be shipped by rail from Long Beach to southern Dallas County. Once here, the goods would be divided up, or even warehoused, until they could be distributed via truck, train and even airplane to the Midwest and East Coast.

Southern Dallas already has gotten a taste of such goods with the opening last year of the Dallas Intermodal Terminal along I-45. (Mesquite and Alliance Airport in Fort Worth have similar operations.)

What makes the southern end of Dallas County so attractive as a port are the railroad lines (Union Pacific and Burlington Northern Santa Fe), the confluence of major highways (Interstates 20, 35 and 45) and the nearness of two general aviation airports (Mesquite and Lancaster).

“If you look at the road and the railroads, they all come through Dallas,” said Dan McAuliffe, vice president of development for the Dallas office of The Allen Group. The San Diego-based company already has locked up nearly 6,000 acres for warehouse and commercial development.

The development could spur as many as 30,000 jobs in the next 20 to 30 years. They would range from $10- to $15-an-hour warehouse jobs to possibly more lucrative office and management work.

“The project has doubled in size in the planning stages,” Mr. McAuliffe said. “The initial plan was for 2,500 acres.”

Transforming a farming community into an industrial hub might scare some people, but not the elected leaders of this long-neglected area. They visited Long Beach recently and came away convinced that their increased tax revenues would make the venture worthwhile.

“We’ve been the backwaters of the metroplex for too long,” said Joe Tillotson, Lancaster’s mayor and a strong proponent of the port.

As he drove me around the cornfields and sleepy subdivisions of his community, Mr. Tillotson gave a surprisingly candid assessment of its flaws, pointing out poorly maintained roads and the lack of sewer and water service in many sections.

“The whole complexion of Lancaster is going to change in the next three to five years,” he vowed. “We’re not going to be known for our country lanes anymore.”

Dallas officials have embraced the project, embarking on a recent trade mission to China, where they asked manufacturers in nine cities to consider the proposed Dallas route.

“The southernmost route from the West Coast is the most economical way to reach the East Coast and Canada,” said Dallas City Council member Bill Blaydes, who led the coalition. “The trade mission to China was to introduce Dallas as that crossroads.”

While it is easy to get excited about this project, there are a number of bridges to be crossed, including future requests for tax abatements from the cities involved and environmental protection.We also need to put aside our anger over what these foreign goods represent to the U.S. economy: our lost manufacturing sector.

At least with an inland port in southern Dallas, these products would be passing through local hands. For that, we’d have to be grateful.

The Journal of Commerce

Logistics in the Heart of Texas

4 September 2006

Dallas and Houston clash over everything from business and sports to which city has the better restaurants. Add to the mix which has the better distribution and logistics network as the cities grapple for a greater share of containerized Asian freight and intermodal North American Free Trade Agreement traffic.

The intense intra-Texas rivalry is part of a larger battle that involves cities such as Kansas City, Mo.; St. Louis; Memphis, Tenn.; and even Indianapolis, all of which hope to use transportation and logistics assets to become the next big North American gateway for Asian imports.

However, Dallas will have to cooperate with its old rival if it wants to be the linchpin of a new NAFTA corridor. It needs containers from the growing Port of Houston to feed its nascent inland port. Likewise, a bigger and better hub to the north could drive more traffic to Houston, the dominant port in the Gulf of Mexico. In fact, changing global logistics demands and distribution networks may drive Dallas and Houston closer – whether they like it or not. The inland Port of Dallas, created through an agreement with the city of Dallas, the Houston Port Authority and the U.S. Maritime Administration, is an example of where the competitors may cooperate for the good of both. Some, however, wonder whether shippers need two major distribution hubs only 240 miles apart, or whether the Port of Houston and Dallas might be better off working together as one greater logistics “super-hub” served by the Trans-Texas Corridor, or TTC.

Dallas hopes to become the place where east meets west – literally. It seeks Asian imports in containers shipped from Los Angeles and Long Beach and intermodal freight moving north from Mexico on the proposed $180 billion Trans-Texas Corridor. Key to Dallas’s aspirations are developments in southern Dallas County, where a new Union Pacific Railroad intermodal yard alongside Interstate 45 is a magnet for logistics developers and promises to complement AllianceTexas and its BNSF hub and airport on the northwestern side of Dallas.

The UP facility is a critical part of plans for the Port of Dallas, which signed an agreement late last year with the Panama Canal Authority to encourage the shipment of Asian cargo through the canal and the Port of Houston to Dallas.

Jon Cross, marketing director for the Allen Group, a San Diego-based commercial development firm building a logistics hub near UP’s intermodal facility, said forecasts for long-term container growth and the region’s burgeoning intermodal capabilities suggest that within 10 years Dallas will be one of the top two logistics markets in the country. “There is so much happening in logistics and transportation in southern Dallas,” Cross said.

But skeptics note that freight could flow as easily through Houston to points east and north, including Memphis, St. Louis and Kansas City, as to Dallas-Fort Worth. “I don’t think the concept of the Port of Dallas will ever apply, at least not in the way it was originally talked about,” said Edward M. Emmett, founder and chief strategist of Emmett Co., an international consulting firm based in Houston.

Emmett, a former National Industrial Transportation League president and Interstate Commerce Commissioner, isn’t convinced that Dallas is a logical choice for a global trade center. He sees Dallas as a strong regional hub rather than a major inland port. It is unlikely that it will attract container traffic from Houston, as Houston is unlikely to send work and jobs north, he said. Others, however, argue that the inland port will relieve potential congestion at the Port of Houston.

Dallas also doesn’t make sense for Mexican traffic coming up along I-35, Emmett said. The roads and rails that pass through San Antonio and Houston are better situated, and those cities have closer cultural ties to Mexico.

Dallas-Forth Worth is also in competition with many other cities. In June, for example, Kansas City Southern announced that it would begin daily service between the Mexican Pacific Port of Lazaro Cardenas and Atlanta – itself a major intermodal hub – via Jackson, Miss.

Overdevelopment is a risk in the Dallas area, Emmett said. “I don’t think you can start building too many logistics parks. They will eat into each other pretty quick.”

That’s not the word in south Dallas, where UP’s intermodal facility is a magnet for development. “Developers are starting to take positions in south Dallas,” said Rob Huthnance, first vice president and Dallas market officer for ProLogis, a major developer and manager of industrial warehouses and distribution centers. “The area is very business friendly, there is less congestion, and land prices are lower than in other parts of the region.”

To date, only the northern half of Dallas has been developed, said Bill Blaydes, Dallas city councilman and chairman of the Dallas NAFTA Coalition. Southeast Dallas County has tremendous development potential, and the area is poised to emerge as the second major intermodal hub in the metropolitan area, he said.

UP opened its $100 million, 360-acre intermodal facility last September. Straddling the towns of Wilmer and Hutchins, the facility is designed to handle 365,000 containers annually and more than quintuples UP’s container capacity in the region. In January, the facility received its first Asian container shipment from the Port of Long Beach.

Allen Group is building a 6,000-acre logistics park adjacent to the UP intermodal yard. Called the Dallas Logistics Hub, the park has the capacity for 60 million square feet of development at a 35-year build-out. The project represents a huge commitment to the region for Allen Group, which has developed more than 50 commercial properties in the U.S. It accounts for a major portion of Allen’s total portfolio of 7,500 acres of land under development.

Lured by access to I-45, soaring land prices in the northern Dallas-Fort Worth area and the promise of an inland port, Indianapolisbased Duke Realty recently began construction of a speculative, 624,000-square-foot distribution facility adjacent to the UP intermodal yard.

The Dallas region has become a national distribution center for a growing number of companies, said Jeff Turner, Duke’s senior vice president. While about 95 percent of containers coming into the UP facility are from Southern California, the prospect of increased NAFTA traffic via Mexican deep-water ports and the Port of Houston led Duke to expand its presence in the region; the new facility is the company’s first foray into south Dallas. “We are trying to find the best of both worlds in terms of Asia and Mexico,” Turner said.

The surge in industrial development is occurring as the largest road and rail construction program proposed since the creation of the interstate highway system more than 50 years ago gets under way in Texas.

In 2002, Gov. Rick Perry announced a 50-year, $180 billion expansion of the state’s roadways and rail lines. Known as the Trans-Texas Corridor and unofficially as the “NAFTA highway,” the project would create a vast new network of passenger vehicle lanes, commercial truck lanes, passenger and freight rail lines and adjacent utility zones. Much of the money for the TTC would be raised through tolls and fees, and parts of the corridor would be built and operated by private companies.

The project’s main roadway components are TTC-69, part of an eight-state, 1,600-mile highway that would connect Mexico, the U.S. and Canada, and TTC-35, a 600-mile, 1,200-foot-wide toll road that would extend from Mexico to the Oklahoma border north of Dallas.

The plan also calls for a 600-mile freight-rail line from Dallas to Mexico that could take up to 1 million trucks per year off of I-35.

Road congestion is a huge problem in the Dallas-Forth Worth area and throughout Texas because of a fast-growing urban population and NAFTA-related trade. The Texas Department of Transportation estimates that by 2025 traffic in the state will have increased 132 percent and an average of 260,465 trucks will travel Texas roads each day. Already, 20 to 38 percent of current traffic on I-35 is attributed to commercial trucks.

In March 2005, Perry signed agreements with UP and BNSF to work together to move freight lines out of densely populated urban areas. “The Trans-Texas Corridor will provide unprecedented trade opportunities, a faster transportation system that moves freight and hazardous materials out of city centers,” he said. But the TTC faces many hurdles before construction can begin. Opponents attack the planned use of tolls, foreign investment in U.S. infrastructure and the massive use of eminent domain to acquire roughly 600 square miles of land for the project.

The proposed route would displace close to 1 million residents, half of them minorities; consume more than 2,400 square miles of prime farmland and 13 square miles of parks; affect the habitats of 46 threatened or endangered plant and animal species; include five federally recognized historic sites; and traverse nine aquifers.

A 4,000-page environmental impact statement released in April, prepared by the state DOT and the Federal Highway Administration indicated the portion of TTC-35 between Dallas and San Antonio would be built east of Dallas, disappointing many in the city who want it to run parallel to the existing I-35. More than 50 public hearings are being held this summer on the issue.

The proposed routing would cause major problems for the Dallas-Forth Worth area by failing to alleviate NAFTA-related congestion, Blaydes said. That TTC-35 would be a privately operated toll road will also generate opposition. “No one likes toll roads, but it was considered the only way to get the highway built in our lifetime,” Blaydes said.

Developers with facilities near the UP intermodal yard want the road closer to Dallas to facilitate freight movement. Cross said it only makes sense to locate the highway “close to the action,” and Turner said it is important for the region’s industrial base that TTC-35 be located as close to Dallas as possible.