January 31, 2008

Dallas Mayor Tom Leppert Pitches City’s Business
Potential in Monterrey

By Lawrence Iliff

MONTERREY, Mexico – Dallas Mayor Tom Leppert was all business Wednesday on the last day of his trade mission to Mexico, promoting North Texas as a health-care destination and as a potential trade hub for goods moving through northern Mexico.

“There’s clearly an opportunity,” he said. “The challenge is to seize it.”

Mr. Leppert started the day by pitching Dallas to Monterrey hospital officials as a world-class destination for specialized medical treatment and as an alternative to Houston, where affluent Mexicans have traditionally sought upscale care. And he toured the Monterrey facilities of Addison-based Mary Kay cosmetics, which is growing quickly and creating jobs in both countries.

But one of the more promising projects he discussed with Mexican officials was the creation of a transportation corridor that would allow both North Texas and northern Mexico to benefit from growing U.S.-Mexico trade and booming Asian imports.

Mr. Leppert acknowledged that the project would be complex and difficult but said that it was worth making the effort.

“All good things are going to take hard work, and nothing’s easy in life,” he said Wednesday after viewing a presentation on possible ways to link the inland port in southern Dallas with a similar one being planned for northern Monterrey.

Both cities are natural transit points, not just for growing trade between Mexico and the U.S., but also potentially for Chinese goods that need alternatives to the crowded California ports of Los Angeles and Long Beach. Some Asian traffic arrives at Mexico’s West Coast ports.

Already, nearly two-thirds of the more than $300 billion in U.S.-Mexico trade moves through the state of Nuevo León, where Monterrey is the capital, and Texas, according to the presentation Wednesday.

The excitement over the inland port concept is that booming global trade will create good-paying jobs in the cities that can best partner with private enterprise and move imports and exports as quickly and cheaply as possible, officials in both Dallas and Monterrey said.

An inland port transfers goods from trains to trucks to planes in any combination, warehouses them, and can even provide manufacturing or final assembly facilities – all job creators.

It can also serve as a port of entry for customs and safety inspections. For example, trucks bound to the U.S. could be cleared in Monterrey and those going to Mexico inspected and sealed in Dallas.

Dallas City Council member Ron Natinsky said there is potential for a powerful new North Texas economic growth machine if the current International Inland Port of Dallas, or “double ipod,” can grow into a major site for transshipment of goods, warehousing and other services.

Dallas’ sister city

Monterrey, already Dallas’ “sister city,” is a critical piece of the puzzle as it plans to soon break ground on its Interpuerto Monterrey, which will be run by private companies with help from the government – just like the Dallas facility.

The bottom line for both regions: jobs and a growing tax base.

“The number we use here in Dallas is the number we got from the port of L.A.-Long Beach,” said Mr. Natinsky on the potential economic boost from a port facility. “Every time a container passes through, there’s a local economic benefit in excess of $400 to the local economy.

“When you start taking a million containers here and a million containers there and start passing them through, there’s a huge economic benefit obviously for the Dallas area, but also a huge economic benefit for the Monterrey area,” Mr. Natinsky said.

Monterrey officials are just as keen on the Dallas inland port, which opened in 2005, and see it as a natural partner once the Mexican project takes off. The land north of Monterrey has been purchased and is set to open before the end of 2009.

“There are a lot of opportunities with Dallas because it is like a mirror image,” said Francisco Javier Alejo, the executive coordinator of Nuevo León’s center for linking northern Mexico to Texas. “We are at opposite ends of a direct transportation corridor. The cities, which are both economic centers, both have great economic power. That’s why it’s so important.”

Both Dallas and Monterrey want to link with all the big players – the port of Houston, the Panama Canal, Mexican ports like Lázaro Cárdenas and Veracruz. But one of the potentially most lucrative deals is with each other, officials said.

“We have a good relationship,” said Mr. Alejo, a former ambassador in Europe and Asia and the Austin consul general from 2002 to 2005. “What has been a little bit dormant in recent years is our sistercity relationship. Part of the reason for this trip is to get it going again. But there’s a very strong business relationship.”

Rail service

That relationship could get a lot stronger if the Dallas and Monterrey ports are able to link up more directly through a rail line that would move goods more cheaply and more efficiently than the semitractor trucks now clogging up highways in northern Mexico and North Texas.

Mr. Natinsky said that rail service from Mexico is problematic because it relies on railroad companies that have other priorities. Building a new railroad line may be the only alternative, although it would cost hundreds of millions of dollars.

“We’ve been in discussions with a lot of people. Everybody sees the need for it. Everybody wants to do it. Nobody has pulled the trigger on it yet,” he said. “When they do, in my mind, that will be the silver bullet that solves the transportation problems between the two inland ports, which also opens up the ability to get connections from the West Coast of Mexico on up to Dallas.”

Karl Zavitkovsky, economic development director for the city of Dallas, said moving special “intermodal” containers on rail from both Monterrey and Houston would give a big boost to the Dallas inland port, which also faces complications with rail service from Houston.

“We can have all the best aspirations in the world, and the inland port of Monterrey can have the same desires, but if we aren’t able to work together with the major railroads then it won’t happen,” Mr. Zavitkovsky said. On the Mexican side, Mr. Alejo said the government plans to build its own rail line to the Texas border that would be open to any railroad company, just like a toll road.

The Monterrey inland port has train terminals on either side – Kansas City Southern and Ferromex (which is about 25 percent owned by Union Pacific) – but neither has made a commitment to the project, Mr. Alejo said.

Strong potential

Right now, the Dallas port serves train traffic from Los Angeles and Long Beach through a Union Pacific railway terminal, which is at its maximum of 400,000 “container lifts” per year, Mr. Natinsky said. The port project could create 7,000 jobs in three years, he said, and the ultimate goal for its future buildout is 50,000 jobs.

In contrast, the 10-year-old Alliance inland port in northern Fort Worth has a terminal run by the Burlington Northern Santa Fe Railway, with a capacity of 750,000 container lifts per year.

With or without a rail connection to Monterrey, Mr. Natinsky said, the southern Dallas facility will grow and thrive. But he’d rather have that link.

One of the biggest landowners in the Dallas inland port is also looking to Monterrey for synergy.

The San Diego-based Allen Group is working with the city and the state of Nuevo León to link its future inland port with the southern Dallas hub.

“With more and more companies deciding as a matter of policy to direct movement of some of their goods from the L.A.-Long Beach area to the deepwater ports in Mexico as a result of congestion, the movement between Mexico and Texas becomes very, very important just as the movement through the Panama Canal to Houston becomes very important,” said Leslie Jutzi, the Dallas-based director of governmental and community relations for the Allen Group.

Mr. Alejo said that Nuevo León and Dallas are not the only players, and the game is on. “The opportunity is there,” Mr. Alejo said. “We are going to see who takes advantage of it, and to what extent.”

January 29, 2008

Global Logistics: Are Inland Ports an Answer to
Congestion – or a Waste of Public Money?

Facilities are Sprouting Up Across the US; a Port in West Virginia?

The last few years has seen a growth industry in terms of interest in, and development of, so-called Inland Ports in the US. Are they a smart answer to congestion and logistics infrastructure issues – or too often a boondoggle that wastes public and private money?

An Inland Port is a site located away from traditional land, air, and coastal borders that has the capability to process international trade through availability of multimodal transportation assets and – often – by promoting value-added services as goods move through the supply chain.

In general, the concept is to quickly move goods in containers from ocean ports via rail or truck, where customs processing, receipt, transloading and other logistics functions can be performed. However, they can also be built as, or with, airports to handle air cargo.

The growth of inland port projects or proposals has occurred for many reasons. In some cases, governments and business interests are looking at the projected growth in inbound container movements into the US. Research firm Global Insights has projected cargo volume from Asia alone will grow by more than 320% over the next 15 years. Many see Inland Ports as a way to add logistics capacity at lower cost and with much greater flexibility than the often landlocked areas around existing ports. It is believed that Inland Ports will also reduce traffic congestion and pollution in those areas. Many states also see Inland Ports as an opportunity to create jobs, sometimes in rural areas.

Many New Projects

Inland Ports have been around for many years. The one in Sacramento, CA opened in 1947, for example. Cincinnati operates a busy Inland Port on the Ohio River, servicing barge traffic. An 11,600-acre Inland Port in Alliance, TX opened in 1990. Another successful Inland Port is operating in Front Royal, VA.

However, a number of Inland Ports have either recently been built or are somewhere in the planning or development stages. Examples include:

• Dallas Logistics Hub: opened in April, 2007, it is the largest new logistics park under development in North America, with 6,000 acres of land and the potential for 60 million vertical square feet of distribution, manufacturing and retail development. It will compete with the older development in nearby Alliance, TX.
• Freight Gateway and Intermodal Center near Kansas City, which is undergoing significant development. Kansas City Southern railroad plans to start operating its new intermodal facility there on March 14.
• Another Texas-based Inland Port is being built near San Antonio, as are new Inland Port facilities in Virginia, California, and North Carolina.

West Virginia is also getting into the act. An Inland Port facility is under development in Prichard, southwest of Huntington, as part of the Heartland Corridor project that received $153 million in federal funding in 2005. It expects to link by rail to the port in Norfolk, VA 500 miles away.

Is An Inland Port Glut Looming?

The development comes at an interesting time. Of late, a combination of slowing import growth, port efficiency gains, and other factors have dramatically reduced congestion issues at existing ports in 2007. While many expect the long-term trend to see renewed logistics pressures at the port, current conditions may cause some to revisit assumptions.

It also seems likely that this simply won’t be enough business for all the Inland Ports under development. North Carolina’s Global Trans-Park, opened in 1991, has never met expectations, for example, and requires state subsidies to shore up operating losses resulting from lower projected volumes. A proposal for an Inland Port in South Carolina collapsed last year amid scandal with the company making the proposal for government funding for the project.

Some Inland Ports that can be served by waterways may get a boost from various green initiatives that see ship transport of cargo as one solution to environmental and congestion woes.

Are you using Inland Ports? Why – or why not? Do you think we may be getting too much development of Inland Ports, which may lead to a glut of capacity and require too much government financial support? Let us know your thoughts at the Feedback button below.

January 14, 2008

Burlington Northern Santa Fe to expand Fort Worth hub:
Move at AllianceTexas could draw distributors; Dallas
may get facility

By Sheryl Jean

Burlington Northern Santa Fe Corp. is expanding its intermodal hub at Fort Worth’s AllianceTexas development while it considers whether to build a similar facility in southern Dallas County.

Last year, the Fort Worth-based railroad said it added nearly nine miles of track and four new trucking lanes to meet current and future demand for business and to speed up the flow of traffic through Alliance.

BNSF spokesman Patrick Hiatte said the expansion created more flexibility in moving shipments through Alliance. The goal is for a train to travel between that hub and a destination, such as Chicago or Los Angeles, without switching tracks, he said.

BNSF doesn’t break out investments for specific projects. Its total capital expenditures were $2.55 billion in 2007.

David Pelletier, a spokesman for Alliance owner Hillwood, said the expansion will help attract more distribution centers. Many of the distribution centers already on site, such as J.C. Penney Co. and Michaels Stores Inc., are there because of BNSF’s intermodal facility, he said.

Vann Cunningham, BNSF’s vice president for economic development, reiterated the company’s commitment to growing its operations at the 12,000- acre Alliance development. The railroad can grow to more than 1 million “lifts” — the number of containers and trailers loaded or unloaded — from the nearly 567,000 lifts completed last year.

At the same time, a new BNSF facility at the 6,000-acre Dallas Logistics Hub in southern Dallas County would complement its Alliance operations, Mr. Cunningham said.

BNSF just extended an option to buy more than 300 acres at the Dallas Logistics Hub with the San Diego-based developer the Allen Group, Mr. Cunningham said. Negotiations are ongoing, and the railroad should make an announcement about the Dallas Logistics Hub in three to four months, he said.

“There are no sticking points. We just have to decide what’s best for the company vs. other decisions,” Mr. Cunningham said.

BNSF is looking at geographical supply and demand, market conditions and the growth of imports. Richard S. Allen, chief executive of the Allen Group, said BNSF wouldn’t put “significant money” on a land option unless they were serious.

“We’re extremely confident that they’ll close on the land in the reasonable future,” Mr. Allen said. BNSF “needs two intermodal facilities in the Dallas–Fort Worth area” because of the industrial growth. “It’s not a question of if, but when, in my mind.”

BNSF and Allen Group officials say the potential for a major railroad to operate two intermodal facilities in one metro area is unprecedented in North America. Union Pacific operates an intermodal railroad terminal adjacent to the Dallas Logistics Hub.

January 1, 2008

Kansas City – City Highlights

By Kristy Main, Paul Licausi, Jeffrey Berg and Brent W. Roberts

Kansas City Multifamily Market

The Kansas City multifamily market is stable, with projections expected to be steady locally. However, widening the scope of comparison for a real estate market during periods of capital market change can be an eye-opener.

Kansas City’s multifamily sector outlook considers the standard measures for commercial investment property — such as job growth, occupancy and rent growth — thus, providing a significant amount of information about the market. However, in these times of capital market change and down-turned housing markets, additional data considered should include investor funding capability and a review of the local market as compared to other regions. An expanded view of any market is helpful most anytime, but it is critical for both buyers and sellers of multifamily in today’s market turmoil.

Nationally, economists report that the overall effect of the down-turned housing markets and resulting reduction in home values will have less impact than the loss of jobs in housing construction and retail. Torto Wheaton Research reports that, while the current housing market would normally cause a greater drag on the economy, the increased businessto-business spending, evidenced by “persistent office-occupancy services growth,” has compensated for the difference. The research concludes that, when coupled with the low and steady unemployment and increasing consumer spending, indicators have begun to point to a correction in motion.

While the Midwest investment market is considered more stable than the coasts, it is occasionally overlooked due to slower growth. In reality, Kansas City has exceeded Torto Wheaton’s expectation for office-occupying jobs and is ranked among the top 15 positive revisions, alongside markets such as New York and San Francisco. This year, employment growth is expected to increase 1.2 percent to 14,000 total employed, with a related improvement in personal income, which is consistent with national expectations. New apartment completions in Kansas City, at 2,402 units, should mirror that of other national markets in keeping with the employment growth trend. An increase of 1 percent, in apartment unit absorption, is predicted.

Vacancy and rent growth are very similar to actual and forecast national data, with continued stabilized vacancy increasing marginally by 0.8 percent by fall 2008. Also, rent growth is expected to hold steady at 2.2 percent, with the rent index projections at $714.78 per unit. Current third-quarter 2007 Kansas City market reports reveal that absorption is much greater in the Olathe, Kansas, and the outer Johnson County submarkets, while rents are highest in three submarkets: central Kansas City, south Overland Park and Mission/Prairie Village, Kansas. The greatest rent growth occurred in north Overland Park, along with a surprising increase in Wyandotte County, Kansas.

Nationally, a shift in buyers shows an increase in institutional and private clients. Data from Real Capital Analytics’ November 2007 Apartment Capital Trends Monthly shows institutional buyers almost doubled market share nationally from January-August 2007 data compared with September-November 2007. CBRE’s Capital Market data confirms this volume trend in multifamily sales when comparing 2007 year-to-date to the same period in 2006. Capital efficient buyers with less reliance on CMBS conduits will more often be able to maintain expected returns. This is confirmed with CBRE Capital Market data that shows life, pension fund and advisors (LPFA); equity/opportunity funds; and foreign and private client buyers of multifamily assets are more often winning the business for which they bid with greater ability now than a year ago.

Interestingly, the Midwest has the highest percentage of institutional buyers compared with any of the other markets. Among the 10 primary Midwest markets, Kansas City, at 41 percent, is second only to Chicago (52 percent) for the amount of institutional investors active in the market. While these are certainly interesting trends, we can’t overlook the rest of the data. Kansas City has the lowest price per unit among all of the 59 markets surveyed by Real Capital Analytics’ as of November 2007, and reveals that while Kansas City doesn’t have the highest cap rate, it does rank toward the top at 7.3 percent on 2007 sales and appraisals. These facts together indicate a greater buying power in the Kansas City market, and capital efficient buyers have the greatest ability to take advantage of that in light of current lending trends.

The Kansas City and Midwest multifamily markets provide a compelling story, not only locally but more importantly, from the national viewpoint. Consistency and stability look the same now as last year to Midwesterners while changes in other factors, such as the capital markets, have provided certain investors with greater incentive to consider assets within this region. Buyers typically dependent on CMBS conduits will be less likely to compete on pricing in these regions compared with those that don’t. Informed sellers also benefit from understanding why certain investors shop Kansas City markets. Sellers aware of property types appealing to today’s buyers are enabled to make better decisions on pricing, marketing and buyer selection.

— Kristy Main is an investment properties broker, specializing in multifamily assets in the Kansas City, Missouri, office of CB Richard Ellis.

Kansas City Industrial Market

What’s the cause of all the buzz about Kansas City? We are seeing story after story in the national press and numerous trade magazines — so, why all the hoopla? The short answer is that there’s a lot going on in the Kansas City real estate market that is worth talking about.

For those not familiar with Kansas City, here are some quick facts about this market that make it an advantageous place in which to do business: Kansas City is located in the center of the United States, at the crossroads of both Interstate 70 (a major national east/west highway) and Interstate 35 (a major national north/south road that is classified as the NAFTA highway). This market has significant transportation infrastructure including superior highway service, significant air cargo service, major rail service (the second-largest rail hub in the nation) and major barge service on the Missouri River. The metro area MSA population has now exceeded 2 million people and is one of the fastest-growing metropolitan areas in the Midwest.

These attributes are a prime contributor to how well the industrial real estate market has been performing over the last several years. While other parts of the county are experiencing economic challenges, the Kansas City metro area continues to remain stable and experience continued growth. The industrial sector contains roughly 241 million square feet of manufacturing, warehouse/distribution and flex product.

The market is very stable, with vacancy rates averaging approximately 8 percent and positive absorption activity for the last several quarters. The development community has been very conservative during the last 36 months, and speculative development has occurred at a more measured pace. This has kept the supply and demand factors in balance. Lease rates have remained stable, but we are starting to see some upward movement in lease rates for both flex and distribution product. However, this increase is minimal and has not had any material effect on demand.

Having said that, some exciting things are about to happen that will change the playing field in Kansas City’s industrial market. Burlington Northern Santa Fe Railway, which announced recently the development of a new logistics park in Gardner in southern Johnson County, Kansas, is moving quickly to start construction for this facility and has indicated that it intends to have it operational by mid-2009. The entire project covers approximately 800 acres, with the BNSF intermodal facility occupying more than 350 acres of the project. The remaining 450 acres will be developed by The Allen Group as the Logistics Park-Kansas City, and will include facilities with dedicated rail service as well as medium and large box distribution and manufacturing facilities.

Along with this major investment in the community by BNSF and The Allen Group, interest in the market from other large corporations has been growing. Kansas City is now consistently on the list for companies searching the Midwest for a location for a major distribution facility. The momentum has been growing; there is a steady stream of large user requirements circling the metro area at any given time. Some notable recent activity in the large box arena includes Musician’s Friend’s 702,000-squarefoot project, Pacific Sunwear’s 440,000-square-foot deal, CNH 500,000-square-foot transaction and Kimberly-Clark 446,000-square-foot facility.

To date, large box development has occurred primarily on a build-to-suit basis, and speculative development of large box facilities has been slow to occur. However, that is about to change. Three speculative large box projects will come online this year and in 2009, including Midwest Commerce Center in Gardner. LS Commercial Real Estate, in conjunction with USAA Real Estate Company, is developing this 151-acre planned business park. Construction will be underway in early spring on the first building within the park, which will be a 520,000-square-foot spec distribution facility. The park will contain five buildings totaling more than 2.2 million square feet when fully developed.

Kessinger/Hunter Company is at work on another large box development that will be underway early this year. The facility will contain 601,829 square feet and is being developed on a speculative basis. Additionally, Trammell Crow Company is planning a speculative big-box distribution facility containing 350,000 square feet at Kansas City International Airport. Trammell Crow is the master developer for a large distribution and air cargo park that will occupy a portion of the airport property. These facilities will give Kansas City a supply of much needed large box facilities that are ready for occupancy. The lack of large box spec product has been a limiting factor for the market, and has caused some companies that were interested in locating to Kansas City to choose other markets. The addition of these spec facilities will fuel further development of product at the larger end of the scale.

In addition to the exciting things happening in the large box arena, development of small to mid-size properties continues. Block & Company, OPUS Northwest, Watkins & Company, LS Commercial Real Estate and Prime Investments have completed new buildings within the last 12 months. New development is occurring throughout the metro area; however, parts of the community that are seeing a higher concentration of activity are southern and western Johnson County on the Kansas side, and eastern Jackson County and southern Platte County (KCI airport submarket) in Missouri. These areas are attracting attention thanks to the availability of utilities and available land that is zoned or master planned for industrial use.

As noted above, lease rates in the Kansas City market have remained fairly stable. New warehouse product coming online is being marketed at lease rates ranging from $4.50 per square foot and up, depending on bay size. There is a mix of modified gross industrial and triple-net lease structures being quoted. The market is slowly converting to a triplenet lease structure on new product. Lease rates for new flex space are averaging from $9.50 per square foot and up, again depending on the bay size. The flex market has been improving over the last 18 months and new development of this product type continues to occur.

In addition to the activity in the distribution arena, one industry has established a large-scale and very successful corridor in the market. Kansas City has become one of the top markets for companies in the animal health industry, with more than 100 animal health companies having a presence in the area. The Kansas City region is supported by some of the top animal health education programs in the nation; universities located in Missouri, Nebraska, Kansas and Iowa have some of the top animal health programs in the county. This is a noteworthy development, as the growth of the animal health industry in the region will be a catalyst for further development of warehouse and flex space.

The outlook for the Kansas City industrial real estate market continues to be positive. Steady growth, low vacancy rates and continued expansion of the industrial base have established a successful recipe for a thriving industrial sector.

— Paul Licausi is president of Overland Park, Kansas-based LS Commercial Real Estate.

ALLEN GROUP, BNSF CREATING INTERMODAL OFFERING IN GARDENER, KANSAS

The Allen Group, a Prairie Village, Missouri-based industrial developer, is developing Logistics Park – Kansas City at the former Richards-Gebaur Airport in Gardner, Kansas, approximately 25 miles south of Kansas City. The locally based industrial developer is building its park on 579 acres acquired in an agreement with BNSF Railway Company, which is developing a new intermodal facility on 418 adjacent acres. The BNSF intermodal project is expected to open in 2009. Together, the two developments will comprise the KC Logistics Hub, which will help further establish the Kansas City market as one of the newest and biggest intermodal hubs in the country.

The Logistics Park – Kansas City will feature a collection of distribution and warehouse facilities, and will be built out over the course of a 20-year plan. It is projected to total more than 7.1 million square feet when complete, and will create as many as 13,000 jobs for the Kansas City area. The site is adjacent to Interstate 35 and State Highway 56, and will have access to BNSF’s Transcontinental mainline.

Kansas City Retail Market

Kansas City retail continues to grow, but at a slower pace than at this time last year. Many new projects coming online this year and in 2009 have been in the planning stages for several years, and are now coming to fruition. It appears that the pace of major new retail centers opening in 2010 and later will taper off compared to the rush of activity experienced during the past few years.

One of this year’s major new projects will be Corbin Park, a 1.1 million-square-foot outdoor regional center located in Overland Park, Kansas. Corbin Park features the first main street design in this prosperous and rapidly growing suburb. The center, being developed by Cormac Company, features several retailers making their first appearance in the Kansas City metro, including Von Maur, Lifetime Fitness (which has already opened), Sports Authority and Biaggi’s, along with a high-end theater

Cordish Company will open a significant portion of its much anticipated downtown Kansas City, Missouri, retail and entertainment complex. The Power & Light district encompasses approximately 500,000 square feet over 9 city blocks, and features a wide array of restaurant, lounge, live entertainment, neighborhood service and boutique retail venues. Construction has also commenced at the Mission Gateway, a 700,000-square-foot mixeduse redevelopment of the former Mission Mall. The Cameron Group has revised the Mission, Kansas, property substantially, adding the metro area’s first and a boutique hotel. public aquarium and reducing the scope of the office and residential components.

Several projects will open or expand in Kansas City’s Northland submarket this year. Cousins Properties’ first metro project — the Tiffany Springs MarketCenter — is located in the booming Interstate 29 Northland corridor and will open later this year. The center features Target, JC Penney, The Home Depot, Best Buy, Sports Authority and PetSmart among other retailers. Steiner will open a Dillard’s department store along with Old Navy and other retailers as part of Phase II of Zona Rosa, the Northland’s premier lifestyle center. Liberty Triangle continues to expand its share in the submarket with the addition of a relocated and expanded Hy-Vee supermarket.

Several projects have been pushed from this year’s pipeline to 2009. Included among these is RED Development’s Summit Fair shopping center in Lee’s Summit, Missouri. A Macy’s department store tailored to the lifestyle center format will anchor Summit Fair along with JC Penney. The redevelopment of Metcalf South Mall in Overland Park, Kansas –— a joint venture of MD Management and Alberta Development Partners — is finalizing junior anchor leasing and has been pushed back to late 2009. Similarly, Adams Dairy Landing, a joint venture between RED and Block and Company that is located in Blue Springs, Missouri, is proceeding toward a 2009 opening. That project will include a Target and Lowe’s Home Improvement Warehouse. First National Development’s 800,000-square-foot, Wal-Martanchored center near the Kansas Speedway is also finalizing its a lineup of junior anchors, including Best Buy and Office Max, and will open in 2009.

Rental rates are holding steady, with increased construction costs being partially absorbed by low cap rates, allowing developers to build with lower spreads. New small shop space leases typically run from $18 per square foot to $28 per square foot, depending on location and finish. Junior anchor lease rates are ranging from the low-to-mid teens per square foot. Landlords are reporting a noticeable slowing of demand for small shop space throughout many submarkets, leading both to increased vacancy and a slowdown in new construction.

Many junior anchor retailers are also reporting full pipelines for 2008 and are looking only at deals for 2009 or beyond. In the restaurant sector, quickservice and fast-casual restaurants continue to seek sites at a brisk pace, but many casual dining concepts are nearly dormant. With most major anchors, including Wal-Mart, Target, The Home Depot, Lowe’s and Costco, well entrenched in the Kansas City metro area and market conditions becoming less certain, development of large new retail projects is beginning to slow. Fortunately, there are exceptions. The Three Trails project, developed by LANE4 Property Group, is a more than 400-acre mixed-use redevelopment of the former Bannister Mall site and surrounding area at the intersections of 95th Street, I-435 and Highway 71 in south Kansas City. The first phase will open in 2010, and will feature more than 700,000 square feet of retail to accompany an 18,500-seat stadium for Kansas City’s professional soccer team, 12 tournament practice fields and a 650,000-square-foot office park. Cedarwood is currently leasing a Target and Lowe’s-anchored center in western Lenexa, Kansas, that will open in 2010. In addition, several national retailers are entering Kansas City for the first time, including Staples and Sports Authority, which will open their first stores this year.

— Jeffrey Berg is a vice president with Kansas City, Missouri-based Lane4 Property Group.

Kansas City Office Market

Is the Kansas City office market recession proof? Despite national reports showing a slow down in office absorption rates in 2007 and further reduction in 2008, Kansas City seems to be headed in the opposite direction.

The office market in Kansas City showed positive absorption of more than 1.5 million square feet in 2007 — more than one-third of this absorption was in the Class A product sector.

Colony Realty Partners is continuing to look at increasing its suburban Class A office holdings. In 2005, the company purchased 7101 Tower on the southwest corner of College Boulevard and Metcalf Avenue in Overland Park, Kansas, for approximately $94 per square foot. This Class A property totals approximately 230,000 square feet. In June of last year, Colony also acquired Financial Plaza, a Class A office development on the northeast side of College and Metcalf. This 292,000-square-foot multi-building development set a high watermark of $154 per square foot for the market. Recent information has Colony as a finalist for acquisition of Commerce Plaza I and II, a 280,000-square-foot, Class A office complex near the northwest corner of College and Metcalf.

Is Colony trying to corner the Class A suburban office market? Probably not — at 800,000 square feet of Class A office space, the company’s portfolio would still lag behind Stoltz Real Estate Partners/Urdang Capital Investment’s investment in the 2.2 million-square-foot, Class A Corporate Woods office park, which is located a mile west of College and Metcalf. Stoltz acquired Corporate Woods in December 2006 for $128 per square foot.

These are high per square foot numbers for this suburban Kansas City market. With fewer landlords to compete with, expect to see Colony and Stoltz push lease rates higher this year. The average Class A rate is approximately $21.50 per square foot, still well below the $23.50 averages from 2000, before the tech crash. Lighton Plaza, which is owned by NewTower Multi-Employer Property Trust, is nearly 95 percent leased, and has the highest lease rate in College Boulevard corridor at $23.50 per square foot.

The other major Class A suburban office project under way is the Hilltop at Briarcliff office building, which is being developed by Briarcliff Development Company. The 220,000-square-foot, speculative development is located in the suburban market directly north of Kansas City’s downtown. Currently under construction, this building will deliver in July. The speculative building is currently 55 percent preleased, and may soon have as much as 85 percent of the space pre leased with 8 months remaining on construction. This continues to show the market’s support for quality product.

With lease rates moving upward and strong positive absorption, Kansas City’s 2008 Class A office market appears to be bucking the national trend.

December 17, 2007

Inland intermodal hub trend driven by numerous factors

Paul Scott Abbott

Driven by port-area congestion, high energy and drayage costs, US heartland labor availability and other factors, the trend toward inland intermodal cargo hubs close to the nation’s geographic center is accelerating.

Nowhere is this trend more evident than the Kansas City area, which not only provides a central location between East and West coasts but also is situated in the middle of increasingly important north-south rail links.

“There seem to be a lot of synergies for us right now, said Chris Gutierrez, president of Kansas City SmartPort, a not-for-profit arm of the Kansas City Area Development Council focusing upon growing the area’s role as a cutting-edge, high-tech inland cargo hub.

Indeed, Kansas City has a long history as a transportation locus, dating back to its days as a nineteenth-century trading post and site of the first permanent rail crossing over the Missouri River, with the construction in the 1860s of the Hannibal Bridge.

Rail continues to be a key component in the commercial role of Kansas City, which is served by five major railroads and is the leading US rail hub in terms of annual cargo tonnage. It also is situated at the convergence of three interstate highways – eastwest I-70 and north-south I-29 and I-35 – soon to be joined by another north-south corridor, I-49, and has more than 10,000 acres of foreign-trade zone space.

For shippers not wanting to depend upon a single seaport for entry into the US market, Kansas City affords ready rail connections to US Atlantic, Pacific and Gulf coasts, as well as to emerging non-US ports, such as those of Prince Rupert, British Columbus, and Lazaro Cardenas, on Mexico’s Pacific coast.

“It’s really starting to resonate as people think about spreading out risk,” Gutierrez commented, adding that cargo containers entering Kansas City by rail from any number of directions can be then delivered by truck to more than half the US population within a day.

Developers of intermodal logistics parks and distribution centers clearly are concurring with Gutierrez, speculatively building sprawling facilities along rail and roadway corridors in the Kansas City area.

Oak Brook, IL-based CenterPoint Properties, which in 2002 opened the first phase of a 2,200-acre intermodal center at the former Juliet Arsenal site in Elwood, IL, is a leader in the Kansas City initiative. Like that Illinois site, which features an expansive Burlington Northern Santa Fe Railway intermodal yard, CenterPoint’s Kansas City project is looking to rail as a crucial element.

CenterPoint is partnering with the Kansas City Southern Railway Co. to develop a 1,300-acre intermodal logistics park at a south Kansas City, MO, site, the majority of which was a US Air Force base.

“Everyone’s realizing the benefits of rail,” said Fred Reynolds, CenterPoint’s senior vice president of development, who noted that inland rail movements  have far lower energy costs than those by truck. The KCS main line that serves the property links the site to Lazaro Cardenas.

Matthew Tramel, CenterPoint’s manager of corporate affairs and marketing, commented, “The traffic congestion on the West Coast ports is driving a lot of this sea change about where you might locate some of these facilities.”

William F. Crandall, president of The Allen Group-Kansas City, whose firm is developing a 1,000-acre logistics park in conjunction with the BNSF some 25 miles south of Kansas City, said the adjacency to rail facilities can lead to shipper savings in drayage expenses so significant that they may even offset the cost of distribution center rental.

Of the central US location of logistics parks, Crandall said, “It’s almost solely a result of the consumer buying patterns, which are dependent on products made in the Pacific Rim. The most costefficient way to ship these products inland is by rail to the Midwest.”

The Allen Group also is developing the Dallas Logistics Hub, adjacent to the Union Pacific Railroad’s Southern Dallas Intermodal Terminal, a potential BNSF intermodal facility, four major highways and an airport. At 6,000 acres, the Texas project is being billed as the largest new logistics park project in North America.

David C. Hinchman, first vice president in the Kansas City office of CB Richard Ellis Industrial Properties, whose firm is marketing on behalf of speculative developer Trannell Crow Co. the 800-acre KCI Intermodal Business Centre adjacent to Kansas City International Airport, said of his hometown, “We’re right in the center of everything, we have excellent labor and people really like being in Kansas City.” Hinchman noted that, while in the 1990s, logistics hub development was burgeoning in such markets at Memphis and Indianapolis, attention now is increasingly shifting to Kansas City.

“It’s a combination of many factors that are coming together,” Hinchman said, citing congestion in other markets, Kansas City’s superb highway and rail infrastructures and changes in trucking regulations that are further limiting continuous road hours for drivers. Containers moved by rail also are not subject to highway weight limitations.

Companies that recently have built major distribution centers in the Kansas City area include Anaheim, CA-based Pacific Sunwear (with a 400,000-square-foot facility already slated for a doubling in capacity), Medford, OR-based Musician’s Friend, Inc. (with a 700,000-square-foot facility soon to expand to one million square feet) and Dallas-based Kimberly-Clark Corp. (with a 500,000-square-foot regional distribution center).

Of course, Kansas City is by no means the only place where inland intermodal hubs are being developed, nor is the concept entirely new. Some two decades ago, port authorities such as those in North Carolina and Virginia developed intermodal facilities a couple hundred miles inland from their busy containerports.

Will Friedman, a former executive director of the Ports of Indiana who now serves as vice president for leasing and supply chain for Indianapolis-based Duke Realty Corp., said he sees the trend toward inland ports as just beginning.

“It is hard to find land close to ports,” Friedman said. “And, if land is available close to ports, it will cost more than land at an inland location.”

Friedman, whose firm is engaged as master developer of the Rickenbacker Global Logistics Park on a former US Air Force base property in Columbus, Ohio, said the combination of on-dock rail capability at a seaport with the ability to run mile-long stack trains to an inland rail facility can make for “a pretty attractive package.”

The Columbus logistics park, some 600 miles inland from Norfolk, expects to benefit from the Norfolk Southern Corp.’s recently commenced Heartland Corridor project to raise tunnel roofs to accommodate double-stack trains.

So long as shippers continue to look to rail as a primary inland transportation solution, inland intermodal facilities and distribution centers should continue to flourish, saving shippers (and ultimately consumers) money while relieving coastal congestion and generating jobs in America’s heartland.

December 10, 2007

Logistics Gets Intermodal

By William Hoffman

The flood of containerized imports hitting U.S. shores from Asia is redrawing the country’s logistics facilities map, driving a boom in intermodal centers and inland hubs that developers say will last beyond this year’s slowing economy.

“The intermodal is the big paradigm shift, the realization that (global) trade is increasing and with that, intermodal is increasing, and that’s creating the development of these new logistics hubs,” said Richard Allen, CEO of industrial real estate developer The Allen Group.

As long as goods can be manufactured more cheaply overseas than in destination consumer countries such as the United States, real estate developers say demand for master-planned logistics hubs will balloon. “As long as populations grow and world economic vitality continues to expand, that will continue,” Allen said. “A slowdown in the current container traffic and trading volumes is not going to stop the larger trends.”

Logistics hubs have been around for 15 years, but they’ve only started to come into their own in recent years as container traffic from Asia boomed into West Coast ports. Approximately 11.7 million containers and trailers traveled U.S. railroads in 2005, compared with 6.2 million in 1990, according to the 2007 study “Integated Logistics Centers” by the Heitman real estate investment management firm.

The report suggests the impact of that enormous volume is doing more than pushing boxes onto railroads. The fat pipelines are attracting more demands for more specialized handling that include the more sophisticated logistics services that work in concert with intermodal transport.

The intermodal facility takes advantage of lower fuel, transport and labor costs available through rail providers and supply chain savings made from minimizing the unloading and repacking of containers as they proceed from manufacturing source to retail destination.

More than just a collection of warehouses or distribution centers, logistics hubs are masterplanned communities providing multiple modes of incoming and outbound transportation as well as accessible infrastructure, continuing development and services. “We’re almost like city hall,” said David Pelletier, director of communications for developer Hillwood. “If (tenants) are having a problem with their streets they come to us and then we approach the municipal and other authorities.”

“We feel with our Alliance Development we sort of developed the prototype of a logistics hub,” said Pelletier. Alliance, north of Fort Worth, Texas, opened in 1994 boasting a cargo-focused airport with an adjacent BNSF intermodal facility.

It was the intermodal business, rather than the airport, that helped build Alliance’s fortunes, and which developers say is the key to logistics hub success.

“Let’s face it: if you are in a 1 million square foot (distribution) facility and getting 30,000 containers a year, the drayage from six, eight or 10 miles away … is probably greater than or equal to the rent,” Allen said. “The point is, you can’t afford not to be adjacent to an intermodal facility if you’re receiving a great amount of containers.”

Most logistics hubs are near or have on-site intermodal facilities; with space at a premium at so many U.S. ocean ports, containerized cargo often goes direct from the container ship onto trains for processing elsewhere. Logistics consulting firm Tioga Group estimated 42 percent of containers arriving at the ports of Los Angeles and Long Beach is distributed this way to the rest of the country.

However, 58 percent is processed through distribution centers in Southern California, such as the ones at Tejon Industrial Complex, a masterplanned development 19 miles from the intermodal site. Barry Hibbard, vice president of commercial and industrial development at Tejon, said his hub’s proximity to West Coast consumer markets means it does not need as much intermodal service as inland ports.

“I think it depends on who you’re trying to serve and where you’re located,” Hibbard said.

Hibbard said corporate emphasis on sustainable development will further propel enthusiasm for large, master-planned logistics hubs.

“If you’re doing a one-off development, you could never afford the time to figure this out, or raise the money to do it,” he said.

“This is why green initiatives will push toward master planning, because you have to have a meaningful scale to afford to do these broader sustainable developments.”

For most users and developers, however, the key attraction to a logistics hub is a nearby intermodal facility, which Allen characterized as “oceanfront property.”

“Large distributors of consumer goods want to be close to the intermodal,” he said.

Winter 2007

Alternate Distribution Locations Serving New Routes from
Here to There

By Ellen Rand

Savannah, Dallas, Kansas City, Columbus. These may not be names that immediately leap to mind as major distribution centers, but maybe they should. Changes in goods movement are prompting big importers and third-party logistics companies to rethink their strategies – with the goal of cutting costs and time as well as boosting efficiency and easing the transport of goods from here to there. Hand in hand with this trend is the growing role of railroads, as companies seek to avoid the costs and congestion of truck traffic over roads that are straining under the current pressure of commerce. Thus, inland ports with intermodal facilities continue to be rising stars.

The Center for Transportation Research at the University of Texas at Austin defines an inland port as a “site located away from traditional land, air and coastal borders with the vision to facilitate and process international trade through strategic investment in multi-modal transportation assets and by promoting value-added services as goods move through the supply chain.” An intermodal facility consists of the movement of entire truck trailers and shipping containers by both highway and rail, using trains for long haul movement and trucks for local pick up and delivery. Such companies as Wal-Mart, Home Depot, Ford, Honda, The Limited, UPS and the U.S. Postal Service are among the many large users of intermodal transportation. Major trucking companies such as J. B. Hunt and Schneider are also large users, as are shipping companies calling at ports on both coasts.

Volume on the Rise

According to the American Association of Port Authorities (AAPA), U.S. ports and waterways handle more than two billion tons of domestic and import/export cargo annually. While the volume has experienced a significant hiccup this year, with a dropoff in housing-related, container-shipped products – such as furniture, lighting fixtures, flooring and tile — by 2020, the total volume of cargo shipped by water is expected to be double that of 2001 volumes. (According to Curtis Spencer, president of the consulting firm IMS Worldwide, 2007 will prove to be flat in growth of container traffic. The average annual increase has been seven and a half to nine percent in North America, but Spencer predicted it would be two percent on the West Coast and five percent on the East Coast.)

Spencer remarked that “Ships have gotten faster, but the supply chain has gotten longer and more complex. Our port capacity is what we have to deal with.” For example, there is little room for additional distribution facilities in Los Angeles.

The AAPA defines TEU (or “Twenty-Foot Equivalent Unit) as a standard linear measurement used in quantifying container traffic flows. As an example, one 20-foot long container equals one TEU while one 40-foot container equals two TEUs.

Assuming seven percent growth in container traffic in U.S. ports, there could be an increase from 35 million TEU’s shipped in 2006 to 90 million in 2020. Complicating the picture, transportation workers will need ID cards in 2008 and “30 to 40 percent of drayage truckers in Los Angeles won’t qualify,” he said. Moreover, thanks to the Safe Port Act of 2006, there will be 10 new data elements related to container-shipped goods. That will slow down the process of getting goods from here to there. Spencer also noted that rail infrastructure is growing faster than road development, with investments of $8 to $12 billion a year. Alternative routes will include shipping to the East Coast through the Panama Canal. The role of the Suez Canal will expand as well. Not to be ignored: a rail line from Prince Rupert, Canada to Chicago. As Spencer pointed out, the CN railroad can put an intermodal facility anywhere along the line in Chicago. The western route Punta Colonet in Mexico is expected to make its debut as a distribution hub in 2015, with service from Union Pacific and BNSX followed by Lazaro Cardenas, a Mexico-to-Kansas City connection. Those intent on staying current on goods movement trends would be well advised to pay attention to what such major companies as DHL/Exel, UPS and FedEx are planning, since they “would be number two, three and four after Wal-Mart if their [shipping] numbers were counted,” he said, adding that Wal-Mart accounts for one million TEU’s annually.

“The real value proposition is knowing where the box gets opened, where you build the building,” he said. According to Spencer, the “hottest new inland ports” are located in California’s Inland Empire; Dallas; Kansas City; Chicago; Memphis; Columbus; Harrisburg; and Front Royal, Virginia. The growth, unsurprisingly, matches up very closely with projected hot spots for population growth over the next two decades.

Ask the Logistics Experts

Phil Trabulsi, senior director, DHL International Supply Chain advised industrial real estate owners and developers that “Your customer is our customer.” He remarked that DHL’s customers believe they’re paying too much for the supply chain and not getting the service they should; all are seeking ways to improve. Trabulsi advised that there is no “one size fits all” answer for importers, but rather, a combination of traditional channels and innovative channels for distribution. Retailers are big users of innovative supply chain ideas, he said. “If you can move a container for $1,000 less per container, that’s a million dollars on 1,000 containers,” significant if you are a 10,000-container shipper.

One supply chain idea that makes industrial real estate owners nervous is distribution center bypass. In a case study example, Trabulsi showed that it takes 56 days for products originating in China to get to a North American consolidation center, a regional distributor and then to stores. However, there is another option that only takes 30 days. The North American distribution center can be bypassed, with products originating in China, going to a China consolidation center (where labor costs are dramatically lower than they are in the U.S.), and from there directly to stores. According to Trabulsi, fewer than five percent of DHL’s customers do distribution center bypass. Plus, deconsolidation centers are growing because 40 percent of TEUs are mixed.

Among the emerging programs DHL/Exel has done is Parcel Direct. For a specialty manufacturer of porcelain collectibles, for example, store cartons were built in Asia, with a UPS label in the carton. Shipping goes to two parcel hubs, then to stores. “The whole operation is done in China,” he said.

Retailers are also leveraging vendors to own inventory. Product is manufactured and sent directly to a vendor-managed distribution center. In East Coast and West Coast Flow Centers, shippers make decisions about where to send product while it is in transit, about five days before arrival. “It’s like a valve,” he said. What enables this type of operation is information technology. “You know exactly what’s on the ship. We see this becoming more important as retailer supply chains.

“Importers will continue to try to find the right combination of distribution channels in order to hold down costs and maintain high service levels,” he went on, adding that 60 to 70 percent will continue to flow through traditional distribution channels. He also noted that “our customers hire MBAs to understand how their cost elements match up with their customers.” Increasingly, the lines between skill sets among real estate developers, shippers and logistics are blurring, as pros from one discipline are hired by another to study and improve goods movement.

A Look at Savannah

The state of Georgia is the second largest importer and exporter of goods to and from China on the U.S. East Coast. Currently Savannah, number five of the top nine ports in the U.S., is the fastest growing on a percentage basis. As Sam O’Briant, executive vice president, southeast region, Duke Realty Corporation, pointed out, its Interstate system is an advantage. There are two major rail carriers plus an abundance of greenfield land not surrounded by the city.

The Port handled 2.3 million TEUs in fiscal year 2007. Savannah is expected to handle more than 6.5 million by 2017. There are intermodal rail connections for CSX and Norfolk Southern. Expansion projects include a new intermodal yard and four new super post-Panamax cranes by 2009.

The Panama Canal’s expansion, slated to be completed by 2015, will bring a new mega-sized class of ship to Savannah. How large is large? Here is an estimate from the Georgia Ports Authority: one 10,000 TEU vessel carrying capacity equals 188,000 foot double-stack trains, 5,800 trucks or 570 Boeing 747 cargo liners. O’Briant noted that several national developers have planted their flags in the Savannah market. Duke, which purchased a 4.5 millionsquare- foot industrial portfolio in Savannah, typically caters to retailers who have thin margins, and therefore appreciate the lower drayage costs associated with a location closer to the port. Savannah has also attracted logistics companies that work with shipping companies like Maersk, transferring goods to trains or trucks and continuing on to Atlanta. Duke, like most other companies involved in inland port real estate, follow decisions by shipping companies and railroads to see where they are investing. “It’s a function of population growth,” he said.

Everything’s Up to Date in Dallas and Kansas City

Richard Allen, CEO of the Allen Group, gave this company’s perspective on the “new paradigm” in world trade, intermodals and logistics at development ’07. The company is developer of four “logistics parks:” Dallas Logistics Hub on 6,000 acres in Dallas; Logistics Park on 1,000 acres in Gardner, Kansas; MidState 99 Distribution Center on 480 acres in Visalia and International Trade & Transportation Center (ITTC) on 700 acres in Shafter, California. The MidState 99 Distribution Center has eight existing buildings totaling over two million square feet of space, all of which are 100 percent occupied. Two new buildings are underway.

Allen has been involved in the Central Valley since the mid-‘90s. “Third-tier markets are wonderful if you buy for the right reasons,” he said. “If you control the land, you’ll control the market or the deal.” Visalia offered inexpensive land and labor plus next day UPS to 95 percent of the state.

Allen’s “aha!” moment about logistics came in 1997, when he visited the Alliance development in Ft. Worth and learned that the driver of that development’s success is its intermodal facility.

“Canada, Mexico and China were our primary trading partners in ’06; by 2020 China will be our number one trading partner,” Allen said. ITTC got Allen started in intermodalism, featuring three miles of BNSF railroad track, two-day trucking to 65 million people and a faster drive from the Port of Los Angeles than to the Inland Empire. From a real estate development perspective, Allen believes that changes in goods movement will influence where distribution centers should be built. “You want to be at the nexus of rail lines,” he said.

Allen had learned about a new Union Pacific (UP) intermodal facility being built south of Dallas in 2003. The company acquired large tracts of land around it over a three-year period – Allen refers to it as “oceanfront property.” The resultant Dallas Logistics Hub is being developed on 6,000 acres with two intermodal facilities. The nearby airport will be turned into a cargo airport. The Hub is also a key component of the NAFTA infrastructure and will serve as a major inland port by receiving products from the Ports of Los Angles, Long Beach, Houston, and the new deep-water ports in western Mexico for regional and national distribution.

“The savings [for tenants] are phenomenal,” he said. The company has developed a Drayage and Rental Equivalency Calculator that shows those substantial savings to prospective tenants. In a one millionsquare-foot facility that accommodates 15,000 containers per year, for example, it would cost $100 per container to dray to Allen’s container park versus going farther north in Dallas for $228. “So the north Dallas lease rate has to be lower to compete with us,” he said. Total per square foot savings for the tenant at the Allen facility: $1.92.

With the aim of improving the flow of goods between Mexico and the United States, Allen has partnered with a Mexican inland port developer to promote a new trade corridor. The agreement links Interpuerto, a Monterrey-Saltillo, Mexico-based logistics hub, and the Dallas Logistics Hub, a 6,000- acre logistics park currently being developed by San Diego-based The Allen Group. The connection of the two hubs is part of a larger movement to improve cross-border trade by expanding infrastructure to boost supply chain efficiency. The partners expect the new corridor to improve efficiency, speed and security, as well as the ability for the two hubs to compete on an international level. By adding a customs pre-clearance zone, imports can be cleared before leaving the port of origin, which should expedite shipment flow and provide additional security for companies operating within the two hubs.

Meanwhile in Kansas City, The Allen Group and BNSF Railway Company (BNSF) finalized the land purchase rights and related pre-development agreements for the development of the Logistics Park in Kansas City. BNSF currently owns 997 acres, with 418 acres dedicated to a new BNSF intermodal facility expected to open in 2009.

New Intermodal Center for Columbus

The major news in Columbus is that the Columbus Regional Airport Authority has partnered with Norfolk Southern Corporation to create an intermodal facility adjacent to Rickenbacker International Airport. The new Rickenbacker Intermodal Terminal is expected to be operational in early 2008. According to the Airport Authority, developing a new rail/truck intermodal facility at Rickenbacker is vital to Central Ohio remaining an advanced logistics center and a key player in global trade. The facility will be used for the interchange of shipping containers between trains and trucks.

Existing facilities are used to the fullest extent and the Rickenbacker area’s current intermodal facility, Discovery Park, has long surpassed capacity. Norfolk Southern has seen an approximate 15 percent increase in demand for intermodal services year-over-year for the past several years. Because Discovery Park is at capacity, Norfolk Southern is turning away business from the Central Ohio region. The new intermodal facility at Rickenbacker will provide increased capacity and improved levels of service, thereby allowing Central Ohio to regain and expand shipping and economic opportunities, including job creation and other public benefits.

Fall 2007

The Big D’s Big Hub

By Jennifer LeClaire

The Dallas Logistics Hub is open for business, and its first two buildings are under construction. The Hub boasts 6,000 acres master-planned for the development of 60 million square feet of distribution, manufacturing, office and retail. The new industrial buildings include a 635,000-squarefoot warehouse facility. Both will be available for occupancy in April 2008, marking the beginning of a new logistics era in Dallas-Fort Worth.

The Hub has the potential to be the first logistics park with two intermodal facilities serviced by the two largest freight carriers in the United States.

Union Pacific Railroad currently operates a 360,000 lift-per year intermodal terminal adjacent to the Hub, with BNSF Railway Co. evaluating a potential site on the western side of the project. The Hub is slated to become one of the biggest economic engines for North Texas. It is projected to create approximately 31,000 direct and 32,000 indirect jobs and increase the tax base for the communities of Dallas, Lancaster, Wilmer and Hutchins by $2.4 billion.

November 26, 2007

Dallas Logistics Hub Set to Hold Official Groundbreaking

By Jeff Berman

DALLAS—Commercial real estate developer The Allen Group is holding a ceremonial groundbreaking ceremony tomorrow for the first two industrial buildings at the Dallas Logistics Hub, which Allen says is the largest new logistics park currently under development in North America.

These new buildings include DLH Building 1, a 635,000 square-foot cross-dock distribution facility, and DLH Building 2, a 192,850 square-foot warehouse facility. Construction began on both buildings last month.

The DLH is comprised of 6,000 acres that are master-planned for the potential development of 60 million square feet of vertical logistics and manufacturing space, according to the Allen Group. The facility is adjacent to Class I railroad carrier Union Pacific’s intermodal facility, the BNSF rail line, major highway connectors—I-20, I-35, and the proposed Loop 9—and Lancaster Executive Airport, which is in the master plan stages to facilitate cargo distribution.

And the Allen Group said that the DLH is a major component of the NAFTA infrastructure and will serve as a major inland port, bringing products byrail from the Gulf of Mexico and the Pacific, including the Ports of Los Angeles/Long Beach and Houston and the western deep water ports in Mexico for regional and national distribution.

Jon Cross, director of marketing for The Allen Group, told Logistics Management in an interview earlier today that there is a “laundry list” of companies interested in the DLH Building 1 and DLH Building 2, but he would not disclose what types of companies they were.

But regardless of the types of companies that move in, Cross said that they way these buildings are designed, a tenant could occupy the whole facility or it could be broken up into smaller units, if needed.

“Larger developers like The Allen Group are building larger facilities—like spec buildings in the 600,000-to-800,000 square-foot area—as well as smaller ones to meet the needs of various types of customers and fit certain markets,” said Cross.

It’s all about location: Along with prospective customers being interested in these two buildings, Cross explained that their location in the Southern Dallas County area is also attractive.

“They really like the infrastructure that is down there,” said Cross. “It is a very attractive area for a shipper, broker, or site selector that is looking to relocate or set something up [as a transportation hub] in the southwestern United States.”

He added that the DLH’s proximity to the Union Pacific intermodal facility is a major boon to prospective tenants, and he said that BNSF Railway is under option agreement on 300-to-500 acres on the western side of the DLH.

“The big box users want to relocate near these intermodal parks to save millions of dollars on drayage costs,” said Cross. “And in return they can take that drayage costs and pass it off to consumers [in the form of savings].”

The location and infrastructure advantages, said Cross, have also prompted Allen Group competitors like ProLogis and First Industrial to get things going in Dallas, too.

Taking the LEED: The Allen Group said that DLH Building 1 and DLH Building 2 are scheduled to be the firstLEED (The Leadership in Energy and Environmental Design Green Building Rating System)-certified industrial buildings in North Texas.

“As all industries are making meaningful efforts to become more environmentally friendly, I think users are trying to take advantage of buildings that are more environmentally friendly. And it is reflective of what is going on in transportation and logistics. Being LEED-certified is the industrial building part of that.”

November 21, 2007

Allen to Build Dallas Hub

By William Hoffman

Commercial real estate developer The Allen Group will break ground Nov. 27 at their Dallas Logistics Hub on two buildings that are expected to be the first in North Texas certified for Leadership in Energy and Environmental Design by the U.S. Green Building Council.

The two buildings, totaling 827,000 square feet, are sited on the 6,000 acre property in south Dallas County, which can support as much as 60 million square feet of distribution, manufacturing, office and retail development.

The Dallas Logistics Hub is located adjacent to Union Pacific’s Southern Dallas Intermodal Terminal and near a possible BNSF intermodal facility, and is close to Lancaster Municipal Airport, which is planning an expansion to facilitate air cargo distribution.