FEATURE ARTICLE, OCTOBER 2006

PORT OF CALL
North Texas’ inexpensive land and its location along shipping routes make it a perfect site for regional distribution hubs.
Paul Waters

Waters

According to the Association of American Railroads (AAR), rail intermodal traffic tripled between 1980 and 2002 — from 3.1 million trailers and containers to 9.3 million. Feeling the impact are coastal ports like Long Beach and Los Angeles, California, which are strapped with high union labor costs and heavy congestion — handling a combined annual total of approximately 14 million 20-equivalent units (TEUs). By 2025, industry experts predict that containers processed in Southern California, Long Beach and Los Angeles ports, the two largest in the United States, will reach 22.3 million TEUs.

While West Coast imports traveling via rail to mid-continent intermodals has been the norm for more than 15 years, many larger companies dependent on receiving manufacturing goods from Asia, like Wal-Mart, are seeking alternative solutions. The answer may fall in a port off the coast of southwestern Mexico called Lazaro Cardenas. This new route has just been introduced to the industry as a viable option for transporting goods coming in from Asia to Monterrey, Mexico, and continuing to Texas cities including San Antonio and Dallas, up through Kansas City and then eventually to Canada. The U.S. Department of Transportation is currently working on a Free and Secure Trade program that would create special lanes to allow trucks from Mexico to cross the U.S. border with minimal electronic in-spection, saving time and mo-ney spent crossing the border.  Laredo, Texas,  remains a major port extension for routing into the U.S. and will remain a significant portal. But, alternatives are presenting themselves and gaining traction.

In addition, Lazaro Cardenas is in route to connect with the Trans Texas Corridor, a 12-lane superhighway and railway following the same lines as Interstate 35E proposed by Governor Rick Perry in 2002 to help ease congestion as the population continues to grow. The draft report narrows the corridor’s potential location to a 10-mile-wide study area that runs through the southeast corner of Dallas County, runs just east of Lake Ray Hubbard and winds through much of Rockwall County. At the earliest, this proposed project would open toll roads or a freight rail line in approximatley 10 years.

Southern Dallas County is also home to the newly developed $100 million Union Pacific Intermodal facility located in the city of Hutchins. Most city officials would agree that intermodal ports are a key to economic growth within an area.  They act as a means to increase coastal port capacities and move goods inland. Intermodals typically function as a goods clearinghouse.  At intermodals, goods are sorted by destination and are redeployed on freight train, air cargo or trucking lanes. The cities capable of developing land for distribution facilities and other peripheral port services realize significant job growth.  Labor creation at warehouses, distribution centers and light-assembly facilities increase dramatically as does the development of residential and retail markets throughout the area.  Improved infrastructure parallels job growth and residential migration. Along with the Union Pacific Intermodal facility and the freeway access, there is a vast amount of available development land along the Interstate 20 corridor that gives developers the opportunity to fill the demand for large corporations’ distribution centers.

Companies in the midst of a selection process for a regional hub location should definitely look to secondary and tertiary markets outside of Dallas County. Not only will they find that they will save money due to lower cost of living and labor, but they will benefit directly from alternative routes coming in from Mexico — in addition to the standard transit lines coming in from the West Coast.

Southern Dallas County, the location of the UP Intermodel port, is already showing significant growth in the past few years. In 2005, 330,000 square feet of new industrial product was delivered to the southern Dallas submarket.  Currently, there are three new construction projects totaling approximately 1.3 million square feet underway. 

The first is the new Dallas Morning News 142,000-square-foot build-to-suit packaging production plant, which will replace their old facility in Plano, Texas.  Duke Realty Corporation has a 624,000-square-foot Phase I project adjacent to the Union Pacific Intermodal in Hutchins, Texas, and Trammell Crow has the 531,254-square-foot I-20 Distribution Center on Hampton Road.  In the planning stages are several other large industrial projects in North Texas, including Panattoni Development’s planned project in Wilmer, Hillwood’s Crossroads Trade Center in Desoto and Prologis’ Park 20/35 in Lancaster.  The Allen Group is planning a massive development that may ultimately encompass nearly 6,000 acres if all the pieces fall in place.

The state is now looking to North Texas as a “modal transition zone” and companies should as well. With the combination of all types of transportation coming together and land available, it’s a win-win for the company and the region.

Paul Waters is senior managing director, North American Industrial Services, for CB Richard Ellis in Dallas.

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