MAY/JUNE 2020
New Projects: Inland Ports, On-Dock Rail and Logistics Park Opportunities
Inland ports, on-dock rail and logistics parks are important parts of the intermodal landscape. What new project opportunities are out there currently, or could emerge across North America? And perhaps just as important, what role could the COVID-affected economic climate play when it comes to getting such projects both off the ground and to the finish line?
Economist Walter Kemmsies, who is a managing director with the Jones Lang LaSalle real estate firm’s U.S. Ports, Airports and Global Infrastructure Group, believes that the U.S. needs to add another 10% more inland ports on top of the current amount, and that there are a handful of locations around the U.S. that are ripe for new project development.
"We’re seeing some efforts in Salt Lake City that to me, seem to pencil out really well," he said, referencing in part the city’s increased development of distribution facilities. He also mentioned a handful of other cities as ones to watch.
"I think Denver is definitely a good candidate for additional rail-supported industrial real estate clustering, meaning manufacturing and distribution centers," he said. "I’m not sure about Phoenix yet—I know they’re making a big effort. Des Moines is another interesting location. Memphis has emerged as a major rival to the Chicago cluster of inland ports."
Other experts interviewed by Intermodal Insights also said that a big part of how and where such projects are built depends on the economic environment.
"The current economic environment always has an effect on what development projects are pursued, and that would include inland ports and logistics parks," Port of Long Beach Deputy Executive Director Noel Hacegaba said. "Still, developers need to plan for the long term, to build today what is going to be needed in the future."
Building for the Future
Among those planning to build for the future is the South Carolina Ports Authority, which operates inland ports in the cities of Greer and Dillon, as well as seaports in Charleston and Georgetown.
"We have been in a very aggressive capital planning mode here during the last six years, to not only improve our existing facilities, but also create new terminal capacity," SCPA Chief Operating Officer Barbara Melvin said.
Jim Newsome, president and CEO of SCPA said he believes that despite the effect the pandemic has had on the global economy, some new projects around the U.S. will continue unimpeded.
"I think that there’s a couple of things that are very favorable to such inland projects: number one, there’s certainly not enough distribution centers in the country today, when you particularly consider [that] e-commerce [fulfillment] takes a lot more square footage apparently than traditional brick-and-mortar distribution centers," he explained.
"A lot of the firms involved in industrial real estate are seeing pretty strong demand right now," he continued. "And to the extent that inland ports are dependent on rail, I think there’s a trend in the intermodal rail business now to try to grow their volume again. I think they’ll be more sympathetic to inland port projects and things of that nature, where they have volume."
Currently, Melvin said, the Ports Authority is engaged in developing an intermodal container transfer facility project that would allow near-dock rail adjacent to a new container terminal that’s under construction at the Port of Charleston.
The transfer facility, Newsome said, will improve the access between port terminals and the rail infrastructure needed to move those containers.
"We do a good job of that today—we move about 25% of our cargo by rail," he said, "but we think that a near-terminal intermodal container transfer facility near the new container terminal … would be very beneficial here in this area to enable the railroads to operate more efficiently and enable us to get containers more efficiently to and from them."
Regarding rail, Tom Williams, group vice president, Consumer Products with BNSF Railway, said that with the global economic environment becoming more challenging due to the fallout from COVID-19, his railroad’s focus is on adapting to the changes in order to meet customers’ needs.
"Our logistics parks are a good example of this principal. We strategically select facility sites to efficiently integrate rail and truck intermodal services and our customers’ distribution centers and warehouses at one convenient location," he said, listing logistics parks in Kansas City and Chicago among the examples of facilities specifically designed to accommodate the growing demand of freight rail in growing metro regions.
Currently, Williams said, BNSF has moved from the pilot phase to production on an automated horizontal container movement module at Logistics Park Kansas City, making it the first rail carrier in the U.S. to implement this technology within an inland intermodal facility.
The railroad also has various other projects, Williams said, that will extend capacity at facilities around its network, such as a new intermodal ramp installed at a facility in Southern California last year.
This year, he said, BNSF is extending existing tracks and creating new production tracks at several of its facilities, plus adding additional parking to reduce congestion, and adding lift equipment to account for the additional capacity at the aforementioned facilities.
Network investments, he said, allow BNSF to adapt to the changing economy and provide increased productivity, efficiency and density in its lanes and facilities.
"Our network is in the best shape it has ever been," Williams said. "When opportunity presents itself, BNSF is in a prime position to strategically extend its reach to new growing markets."
'More Enthusiasm'
Kemmsies also said that although there’s been an economic downturn caused by the pandemic, it hasn’t dimmed the prospects of planned projects, but that some may be temporarily on the back burner.
"What is happening is people who develop these projects are very senior people and given the current state of the crisis, they have to worry more about current operations and their managerial responsibilities. But there is no loss of enthusiasm [for new transport projects]. I think if anything, there’s more enthusiasm. I think if anything, what we’ve seen from the duress on the trucking industry during the coronavirus period is that having a well-functioning rail system can be a life saver."
Seana Fairchild, an assistant vice president with Union Pacific Railroad, said that intermodal will increasingly be required to provide service in nontraditional intermodal lanes, including to, perhaps, private intermodal terminals.
"Salt Lake City's inland port and logistics park development project is an excellent example of this, where conceivably, on-dock rail to inland port could result in expedited evacuation from the ports to this interior point for deconsolidation and furtherance of the freight," she said.
Fairchild added that although there’s a great deal of uncertainty and volatility caused by the COVID-19 pandemic, there’s every reason to expect that planning and construction may be accelerated by the present crisis.
"For 20 years now, we have observed a rapid expansion in online sales at the expense of brick-and-mortar retailers, and online sales drive a need for the speed-to-market that inland ports and logistics parks can support," she said. "The global pandemic may fast-track the transition as people become even more comfortable with the convenience of online purchasing."
"Another factor that could drive acceleration of these projects is that developers may see this time as an opportunity to bet on the future, leveraging other assets for low-interest loans and attractively priced real estate," she explained. "That said, employment will drive consumer spending, so job re-creation will be paramount to the pace of any development growth."
