Jones Lang LaSalle
IT TAKES A FREIGHT VILLAGE
USA 02 16 06
Roberta Weisbrod
International trade continues to expand after setting a double digit pace over the past decade, and freight transport is projected to double over the next two decades. So it is easy to understand the need for super-efficient distribution centers where containers carrying international and domestic goods are broken down and recombined for the customer.
The industrial real estate sector is riding the crest of global trends and building to keep up. The action is hottest at border crossings and ports in major cities. The Los Angeles metropolitan area is the continental mouth open to the onslaught of low cost goods from Asia, primarily China. According to data from CB Richard Ellis, by the third quarter of 2005, Southern California had a vacancy rate of 2.7% with 36 million square feet of leasing activity, of which 61% was in the Inland Empire. Chicago industrial operators and developers leased t 31.5 million square feet in 2005, with 18.3 million square feet of new construction starts in a market with an 8.6% vacancy rate.
Dan O'Connor, director of research at Global Real Analytics in California, notes that there is "healthy demand" in the industrial sector nationwide. "There is improving occupancy, development is at moderate levels from a historical standpoint, and Global trade createing need for modern space around the world," says O'Connor.
There are, however, challenges from every direction to the standard business model of building distribution centers on cheap land, which is typically at a distance from more pricey real estate near cities, ports and border crossings. The first is from the customers the truckers (and the shippers who send them) transporting goods between port/border, distribution center, and consumer. The longer distances they have to travel limits the number of local runs a day. Other forces, including a driver shortage, reductions in the allowable hours of service and congestion severely exacerbate this problem.
A second challenge is, simply put, neighbors and neighborhoods. Small towns resent the congestion and get limited benefits from the through traffic. Urbanites who consume trucked goods nonetheless dislike the truck-clogged streets, for which they are paying more in both cost and quality of life.
But a third challenge also creates the most opportunities to resolve some of the issues outlined above: distribution tenants are not getting the services they need. Under the current model, the individual distribution center tenant must procure a-la-carte services that they need in order to do business. Security? A chain link fence and a guard. Place for a meeting? Go offsite. Food for workers and management? Go offsite. Banking; hiring; training; conferencing? Offsite. Transport for workers? Private automobile. A dignified workplace with landscaping, and maintenance, and advanced communication options?
Dream on!
One alternative that goes a long way toward solving or reducing these issues has been launched in Europe, and is beginning to receive serious attention in the U.S.: freight villages: large-scale developments that house several distribution centers and other freight businesses, with 24 hour perimeter CCTV security, intermodal operations, business services, amenities and urban-friendly features.
There are more than sixty freight villages in Europe. They are designed for the tenants, enabling them to do business efficiently by concentrating their anticipated workforce and management needs on site. They are all within a few miles/minutes of the cities they serve, making it easier to do business and to attract a concentration of workers. The ZAL (Zona Actividades Logisticas) Freight Village in Barcelona is owned by CILSA, a Spanish public private corporation that is 75% owned by the Port of Barcelona and 25% by the private corporation SEPES, offers free transit from the city for the workers. By being closer to a city, the numbers of truck miles are reduced; there are accessible jobs for residents; and the freight villages with their commitment to quality can become amenities for the urban area landscaped, well maintained, and a potential canvas for architecture. Additional value-added features include extra warehouse space for short-term needs; conference centers; hiring halls; training centers; restaurants; banks; jogging trails; and even nature paths.
Overall, the freight village can offer a setting of such high quality that the distribution center can function as a showroom. Business operations become more efficient and can expand with the synergies of agglomeration. Additional opportunities may arise through contacts within the international freight village network.
It all sounds great, but what about America? We have no freight villages yet, although Watsonland in California comes closest. The opportunity exists here to build on the European model, primarily through the ability to acquire large parcels of land and apply proven corporate standards of ownership and management. The New Jersey Transportation Planning Authority is exploring reusing brownfields for distribution centers and other types of freight-related real estate. Brownfields may be purchased cheaply but the cleanup imposes an investment that surface parking, for example, cannot return. The New York Metropolitan Transportation Council has recently undertaken a similar study. But with high-value, high-quality freight villages, the investment can be recouped. Freight villages set the stage for a high return on investment by attracting higher-quality tenants willing to pay premium rents for more efficient, amenitized workplaces.
In a study of European freight villages, conducted by the Partnership for Sustainable Ports for Union County, N.J., we looked at patterns of ownership and operation. Critical to the success of developing freight villages is the structuring of private-public partnerships with local and regional governments involving land donations, tax and other incentives, perhaps in exchange not only for job creation but also environmental stewardship.Roberta Weisbrod of the Partnership for Sustainable Ports is a consultant working in the arena of freight transportation land use.
IT TAKES A FREIGHT VILLAGE
USA 02 16 06
Roberta Weisbrod
International trade continues to expand after setting a double digit pace over the past decade, and freight transport is projected to double over the next two decades. So it is easy to understand the need for super-efficient distribution centers where containers carrying international and domestic goods are broken down and recombined for the customer.
The industrial real estate sector is riding the crest of global trends and building to keep up. The action is hottest at border crossings and ports in major cities. The Los Angeles metropolitan area is the continental mouth open to the onslaught of low cost goods from Asia, primarily China. According to data from CB Richard Ellis, by the third quarter of 2005, Southern California had a vacancy rate of 2.7% with 36 million square feet of leasing activity, of which 61% was in the Inland Empire. Chicago industrial operators and developers leased t 31.5 million square feet in 2005, with 18.3 million square feet of new construction starts in a market with an 8.6% vacancy rate.
Dan O'Connor, director of research at Global Real Analytics in California, notes that there is "healthy demand" in the industrial sector nationwide. "There is improving occupancy, development is at moderate levels from a historical standpoint, and Global trade createing need for modern space around the world," says O'Connor.
There are, however, challenges from every direction to the standard business model of building distribution centers on cheap land, which is typically at a distance from more pricey real estate near cities, ports and border crossings. The first is from the customers the truckers (and the shippers who send them) transporting goods between port/border, distribution center, and consumer. The longer distances they have to travel limits the number of local runs a day. Other forces, including a driver shortage, reductions in the allowable hours of service and congestion severely exacerbate this problem.
A second challenge is, simply put, neighbors and neighborhoods. Small towns resent the congestion and get limited benefits from the through traffic. Urbanites who consume trucked goods nonetheless dislike the truck-clogged streets, for which they are paying more in both cost and quality of life.
But a third challenge also creates the most opportunities to resolve some of the issues outlined above: distribution tenants are not getting the services they need. Under the current model, the individual distribution center tenant must procure a-la-carte services that they need in order to do business. Security? A chain link fence and a guard. Place for a meeting? Go offsite. Food for workers and management? Go offsite. Banking; hiring; training; conferencing? Offsite. Transport for workers? Private automobile. A dignified workplace with landscaping, and maintenance, and advanced communication options?
Dream on!
One alternative that goes a long way toward solving or reducing these issues has been launched in Europe, and is beginning to receive serious attention in the U.S.: freight villages: large-scale developments that house several distribution centers and other freight businesses, with 24 hour perimeter CCTV security, intermodal operations, business services, amenities and urban-friendly features.
There are more than sixty freight villages in Europe. They are designed for the tenants, enabling them to do business efficiently by concentrating their anticipated workforce and management needs on site. They are all within a few miles/minutes of the cities they serve, making it easier to do business and to attract a concentration of workers. The ZAL (Zona Actividades Logisticas) Freight Village in Barcelona is owned by CILSA, a Spanish public private corporation that is 75% owned by the Port of Barcelona and 25% by the private corporation SEPES, offers free transit from the city for the workers. By being closer to a city, the numbers of truck miles are reduced; there are accessible jobs for residents; and the freight villages with their commitment to quality can become amenities for the urban area landscaped, well maintained, and a potential canvas for architecture. Additional value-added features include extra warehouse space for short-term needs; conference centers; hiring halls; training centers; restaurants; banks; jogging trails; and even nature paths.
Overall, the freight village can offer a setting of such high quality that the distribution center can function as a showroom. Business operations become more efficient and can expand with the synergies of agglomeration. Additional opportunities may arise through contacts within the international freight village network.
It all sounds great, but what about America? We have no freight villages yet, although Watsonland in California comes closest. The opportunity exists here to build on the European model, primarily through the ability to acquire large parcels of land and apply proven corporate standards of ownership and management. The New Jersey Transportation Planning Authority is exploring reusing brownfields for distribution centers and other types of freight-related real estate. Brownfields may be purchased cheaply but the cleanup imposes an investment that surface parking, for example, cannot return. The New York Metropolitan Transportation Council has recently undertaken a similar study. But with high-value, high-quality freight villages, the investment can be recouped. Freight villages set the stage for a high return on investment by attracting higher-quality tenants willing to pay premium rents for more efficient, amenitized workplaces.
In a study of European freight villages, conducted by the Partnership for Sustainable Ports for Union County, N.J., we looked at patterns of ownership and operation. Critical to the success of developing freight villages is the structuring of private-public partnerships with local and regional governments involving land donations, tax and other incentives, perhaps in exchange not only for job creation but also environmental stewardship.Roberta Weisbrod of the Partnership for Sustainable Ports is a consultant working in the arena of freight transportation land use.
posted by Jones Lang LaSalle NJ News Blog at 5:01 PM
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