Searching for the Perfect Site - Inbound Logistics
Site Selection, Transportation, Technology New site selection challenges magnify the importance of finding not only the right spot on the map, but also one that offers technology, transportation, and opportunities. The right logistics partners can help focus your search.It's a logistics truism: Where you start is as important as where you are going. That's why the old real estate mantra—location, location, location—remains at the heart of any definition of an optimal logistics site.The terrain in the logistics landscape, however, is constantly changing. Yesterday's ideal sites must respond to those changes to maintain their status as tomorrow's ideal. The exponential growth of e-commerce and the constantly evolving rules regulating workplace environments and the shipment of goods have combined to present both new obstacles and new paths for logistics providers.All of which leads to new challenges for those in search of the logistics sites and services best suited to the products they put on the move. Right place, sure. But efficiency is the ultimate key to success in supply chain management, and those in search of the right place for their manufacturing facility, distribution center, or warehouse must consider not just the right spot on the map but also the most conducive blend of technology, time, transportation, and costs. Knowing the NuancesAs every leader knows, no two businesses are precisely alike. Responding to the nuances that differentiate one company from another can spell the difference between success and failure.So, too, are there differences in the logistics assets most beneficial for specific companies and their unique markets. Not surprisingly, then, the logistics providers who recognize and respond to those differences are the ones who will prove to be the best partners."The definition of an 'ideal' logistics location varies by customer, as does the use of the asset," says Steve Schnur, executive vice president and chief operating officer at Duke Realty, a leading owner, developer, and manager of logistics real estate."We find the characteristics that most logistics customers consistently desire are convenient locations, a robust workforce, and facility flexibility and value," Schnur says."Clients want to be near population centers with access to infrastructure and proximity to highways, railyards, and airports," he adds. "Clients want to work in communities that are business friendly and have a workforce that is skilled and ready to work."Most importantly, clients want to ensure that development and building costs are controlled and the site offers flexibility for trailer staging, employee parking, and docks where inventory can be easily transported."Positioned for SuccessSchnur's assessment is informed by Duke Realty's positioning in 20 markets throughout the United States. Based in Indianapolis, Duke Realty's varied markets include Atlanta, Central Florida, Chicago, Cincinnati, Columbus, Dallas, Houston, Indianapolis, Minneapolis-St. Paul, Nashville, New Jersey, Northern California, Pennsylvania, Raleigh, Savannah, Seattle, South Florida, Southern California, St. Louis, and Washington, D.C./Baltimore."At Duke Realty we are selective and operate within just a handful of submarkets in the 20 cities where we own property," Schnur adds. "We are thoughtful and strategic in making investments and acquiring assets. Our decisions are rooted in long-term viability for continued demand and limited competition for supply. They offer the ability to increase value and elevate the quality of our investments."Duke Realty seeks to help its customers couple the broad assets necessary for any business to succeed with the unique needs that distinguish them from their competition."Duke Realty's leasing and property management teams work closely with tenants to achieve win-win solutions," he says. "We have nearly 50 years of experience in operating facilities.We leverage that experience to help our clients create long-term solutions for their facilities and their operations."We work in tandem with our clients to make strategic decisions, whether it's reducing operating expenses or operating in a more sustainable and environmentally friendly way," Schnur says. "We help our clients plan for future growth and company success. Our local teams are immersed in the market and act as consultants when working with our customers."HAVing a Long-Term ImpactDuke Realty places a premium on social responsibility. "Environment, social and corporate governance investing, and finding better ways to operate facilities will continue to get attention and drive change within our industry," Schnur says. "Companies are working toward minimizing their environmental impact and this will ultimately affect costs, approvals, site configurations, and timing."Duke Realty has been proactive in this area, which has positioned the company as a leader in the industry and prepared us for future success," he notes.Just as the precise ingredients of logistics success vary by company, all companies need to be prepared for changes in the overall economy and their own particular markets. Schnur credits Duke Realty's own success in large part to the company's flexibility and adaptability."Duke Realty continues to be on the forefront of market trends," he says. "In fact, we are vigilant about tracking automation advancements in logistics and how we can support our clients' needs."One challenge many of our customers face is finding enough qualified workers for their operations," he adds. "Significant investment is going into robotics and automation to help fill this gap. We will continue to see investment and progress in automation to help businesses grow despite a limited skilled labor market."Finding the Sweet SpotFor a logistics site to be considered optimal, it must not only be at the right location on the map but also the right facility at the location.Finding that sweet spot is the mission of CenterPoint Properties, which invests in industrial real estate in port and infill markets to help companies maximize supply chain efficiency and realize cost savings.The firm takes a highly targeted approach, focusing on regions ideally situated for logistics advantage: the Bay area, Los Angeles, New York, New Jersey, Seattle, Houston, Charleston, Savannah, and South Florida, in addition to the Chicago area where CenterPoint was founded nearly 40 years ago."We take a sharp-shooter strategy, very focused on a street level on the best submarkets in the best markets in the country," says Paul "PJ" Charlton, senior vice president, who oversees the company's East Coast investments."We are enhancing our national portfolio by buying and developing one building at a time," he says. "Our approach is to look at our target markets and hand-select, street by street, the properties we like."That meticulous approach hasn't slowed CenterPoint down, as it has invested more than $500 million in the New York/New Jersey region since 2017, and $3.5 billion nationally during that time.A strategic PartnerFor users looking to find real estate solutions in the most competitive markets in the country—often searching for a specific type of facility—Charlton says it's invaluable to have a partner like CenterPoint with precise knowledge of the area."Partner with someone who can find or create the right site, close to ports and population centers, and with highway access," Charlton says. "Partner with someone who has good relationships with the local municipalities and who can help guide you through local codes and regulations. At CenterPoint, we pride ourselves on doing all those things for our clients."CenterPoint acquires, develops, redevelops, manages, leases, and sells state-of-the-art warehouse, distribution, and manufacturing facilities near major transportation nodes. The company's experts focus on large rail, port, and trucking infrastructure assets."On the East Coast, we focus our efforts on markets that have strong economies, robust port activity, and major population centers," Charlton says. "Our team finds logistically advantaged real estate opportunities, taking on complex deals to deliver solutions for our clients."CenterPoint has 6 million square feet of space in and around New York City. One of its most recent strategic investments in the New York/New Jersey market came in 2019 when it acquired 1049 Secaucus, a 315,000-square-foot last-mile delivery hub in Jersey City."This was a unique opportunity for us to buy a new building in Northern New Jersey," Charlton says. "We targeted the building as one of the best warehouses in the region."One unique aspect of this facility that we liked was that it offers tremendous parking," he adds. "There is five times the amount of trailer parking than in a typical warehouse in Northern New Jersey."Targeted approachCenterPoint takes a similar targeted approach on the West Coast, operating in the major markets of Los Angeles, Oakland, and Seattle. "As a gateway to Asia, Canada, and Mexico—as well as domestic markets—our experts in the Western United States can provide access across the region," Charlton says.Headquartered in Oak Brook, Illinois, CenterPoint has an especially strong presence in the nation's heartland, a lifeline for global supply chains and a major player in high-value international trade."We don't try to be everything to everyone," Charlton says. "The markets we invest in can be expensive at times, but we believe they will present the best growth and returns over the long term."We are believers in building our portfolio one building at a time," he says. "You end up with a portfolio of strategic assets for the long term. We buy locations within that sandbox, and sometimes the buildings have all the modern bells and whistles; other times they need redevelopment."An operator as well as an investor, CenterPoint is known for its extensive redevelopment efforts, breathing new life into properties whose potential had not been realized and enhancing the area's logistics assets.Looking to the future, Charlton says e-commerce will continue to be a major driver in acquisitions to serve the company's tenants. "The acceleration of e-commerce is changing the playing field," he says, requiring companies to find properties that put them even closer to their customers. Parking will be key, as tenants need more space for fleets, vans, and employees."We will continue to seek out unique real estate solutions to help meet the evolving logistics needs of our tenants while growing our national portfolio by acquiring and developing the most dynamic markets in the country," he says.Past, Present, and FutureCompanies in search of a great logistics site are wise to look to the professionals who not only understand the markets of today but also bring a historical perspective to their assessments."To understand the future, you need to understand the past," says Lance Ryan, executive vice president and chief operating officer of Watson Land Company, a developer, owner, and manager of industrial properties in Southern California and on the East Coast. Watson has developed millions of square feet of master-planned centers within a short distance of the Los Angeles and Long Beach ports, resulting in much lower drayage costs and a significant increase in truck turns. Corporate offices are located in Carson, California.Watson currently has eight master-planned centers in California as well as one in Lehigh Valley, Pennsylvania.Having been in business for more than two centuries, Watson is in a position to take the long view. The company's ever-expanding portfolio of properties contains close to 22 million square feet of warehouse and distribution facilities throughout the South Bay of Los Angeles and the Inland Empire, a metropolitan area and region that lies adjacent to Los Angeles.To put the vastness of the region in perspective, consider this: The combined counties of the Inland Empire are larger than many U.S. states.Taking the lead on LeedWatson was the first industrial developer in Southern California to design and construct speculative industrial buildings in accordance with the U.S. Green Building Council's Leadership in Energy & Environmental Design (LEED) guidelines. "We were green before green was a thing," Ryan says.The company's assets and operations are backed by one of the most conservatively managed balance sheets in the real estate industry."Watson's stable financial resources enable the company to fund projects regardless of external market forces," says Ryan, who adds that the company's relationships with the communities it serves is a hallmark of its success and the reason for its status as one of the region's most respected names in commercial real estate and one of the largest industrial developers in the nation."The support we give to our communities defines the foundation of our corporate values," Ryan says. "Our deep tradition of philanthropy has been in place since our company's founding, with a focus on contributing in palpable, significant ways."The company supports programs that benefit youth, families in crisis, senior services, workforce development, literacy, and public safety.core CommitmentThe company's commitment to community concerns extends to its core business: delivering functional, high-quality buildings within master-planned centers, thereby creating ideal opportunities for companies searching for their next distribution center, warehouse, or company headquarters."Our master-planned centers are developed within locations that provide immediate access to major freeways, ports, airports, and intermodal rail," Ryan explains."This provides our customers speed and flexibility whether they transload imports, export raw materials, or distribute their own manufactured products," he says.Watson customers enhance the advantages of their locales through the activation of Foreign Trade Zone (FTZ) status. Granted through the Port of Los Angeles within the Watson subzone of FTZ 202, the FTZ status can be activated for some 12 million square feet of Watson facilities.Companies can use the FTZ status to reduce operating costs for their manufacturing and inventory facilities. The non-privileged foreign position allows the duty rate for goods entering into an FTZ to be assessed according to the condition of the merchandise.In addition, with access to product for display or exhibition purposes without customs intervention or supervision, utilizing an FTZ can significantly minimize bureaucratic regulations.Operational AdvantagesThe FTZ designation also offers operational benefits, which companies can use to gain a competitive edge.Companies have better inventory control with less customs supervision, and the duty payable on FTZ goods doesn't need to be included in the calculation of insurable value, which lowers insurance costs.The FTZ may be utilized to examine product so it meets accurate specifications before duty is paid.Certain types of merchandise can be imported without going through formal customs entry procedures or paying import duties until the products are transferred from the FTZ for U.S. consumption.If the products never enter U.S. commerce or are re-exported to other countries, there is no requirement to pay duties on those items.Energized to SucceedIf location is the door to logistics success, power—raw power, the kind that makes machines run and lights go bright—is the key that opens that door. Case in point: Hoosier Country.Indiana is widely known as the "Crossroads of America," ranking first in the number of pass-through interstate highways, home to the second-largest FedEx hub in the world (Indianapolis), and within minutes of UPS's primary hub (Louisville). Logistics operations in Indiana can reach as much as 60% of the U.S. population within a one-day drive.Of special interest to logistics operations requiring bulk transportation, Indiana also is home to an outstanding inland port network including access to international markets by way of the Great Lakes and the Ohio and Mississippi rivers. For good measure, rail availability rounds out the region's multimodal assets.But all these advantages would be for naught were it not for the power that connects them and makes them go.It is a point well understood by Hoosier Energy, an electric generation and transmission rural electric cooperative owned by 18 Rural Electric Member Cooperatives (REMCs) serving 59 counties in central and southern Indiana and southeast Illinois.Hoosier Energy's power network provides electricity to developed sites and industrial parks along the I-70, I-65, I-64, and I-74 corridors. The network's workforce is located in adjacent metropolitan areas such as Indianapolis, Louisville, Cincinnati, and Evansville.This ideal place on the map provides a powerful boost to the companies and agencies that occupy it because Hoosier Energy can effectively leverage regional assets by providing competitive electric rates to the area.The impact is particularly significant for logistics providers focused on the future. Best of all is that the power can be harnessed economically as well as efficiently.Partner in Progress"As a nonprofit cooperative, our rate structures are not regulated by the state utility regulatory commission, which allows us rate flexibility and the ability to quickly and efficiently make decisions related to large projects with tight timelines," explains Jeff Pipkin, economic development manager for Hoosier Energy."This flexibility includes the development of special contracts for specific projects that meet a company's corporate goals, including providing up to 100% of their energy needs through renewable resources," he says.That means individual logistics providers and the region itself have a powerful partner in progress. Hoosier Energy works with and supports regional and local economic development organizations in identifying and developing new potential sites near logistics assets, including federal and state highways, Class 1 and short-line rail lines, and airfreight infrastructure."For qualifying logistics operations, the REMCs supported by Hoosier Energy can provide financial support through an economic development rider that reduces energy costs during the early years of operation, thereby reducing a company's start-up costs," Pipkin says."We can assist localities with environmental and technical studies to help bring a site to 'shovel-ready' status," he notes. "We also help market these sites through national advertising campaigns and targeted market trade missions to generate prospects who will utilize these assets."Looking ahead, Hoosier Energy is going through a major power production transition with the planned closure of its 1,000-megawatt coal-fired Merom Generating Station in 2023. "Closing the facility will dramatically change the energy portfolio and decrease our carbon footprint by 80%, replacing coal with renewable energy resources," Pipkin says.Getting the Job DoneSuccess in logistics depends on talent, transportation, and travel time. Whether access to these assets occurs naturally or through innovative approaches, great logistics sites and services share a laser focus on getting the job done.Brian E. Clark, chief operating officer of North Carolina Ports, oversees an organization whose mission is to get the job done by utilizing all the advantages of natural access and enhancing those advantages by creating additional connections to national and international markets."North Carolina is the ninth-largest state and growing larger each day, and southeastern North Carolina alone has the fastest-growing county in the state," Clark notes. "Global markets recognize this growth. New businesses are moving into the region to take advantage of our workforce, rail and truck capability, and a growing community of supply chain logistics professionals."It also helps that our region offers convenient access to two deep-water ports—the Port of Wilmington and Port of Morehead City—and an international airport in Wilmington," he adds. "These assets help connect North Carolina to the world."Moreover, the region offers rail access via CSX and Norfolk Southern, and is conveniently connected to major thoroughfares including U.S. 421, I-40, I-95, I-85, and I-77.North Carolina's ports are among the most market-accessible ports on the U.S. East Coast. Within 1,000 miles of North Carolina's borders are more than 170 million U.S. and Canadian consumers, more than 65 of the country's top 100 metropolitan areas, and nearly 60% of total U.S. retail sales.Leading-Edge SolutionsThe numbers add up, certainly, but the effect is multiplied through leading-edge delivery of services. This is exemplified by the Port of Wilmington, which offers overnight access to 49% of North America's population."What makes the Port of Wilmington so competitive is its level of efficiency," Clark says. "The Port of Wilmington offers the highest vessel productivity and the fastest truck turn times on the East Coast and lacks the waterside congestion that many neighboring ports face. These land-side and water-side efficiencies make our port an attractive option for customers."Among the factors that make the Cape Fear region and southeastern North Carolina appealing for economic development opportunities is readily available sites with room to grow near the Port of Wilmington. "This is important because as this area grows and the consumer base advances, we will need access to more distribution," Clark says.Looking to the future, North Carolina Ports has an aggressive expansion plan backed by more than $200 million in capital improvements. Completed improvements include a wider turning basin, berth enhancements, air draft improvements, and three neo-Panamax cranes that allow the largest vessels transiting to the East Coast to reach the Port of Wilmington.Cargo Capacity GainsNorth Carolina Ports also recently opened a multi-million-dollar refrigerated container yard at the Port of Wilmington. This project triples the port's on-terminal refrigerated container capacity and enables better support of the growing agriculture and grocery sectors across the state.Other improvements in development include a container terminal master plan, which will increase the Port of Wilmington's annual throughput capacity to more than one million TEUs, as well as the construction of a new truck gate complex and deployment of a new terminal operating system."Together, these projects will enable North Carolina Ports to meet the demand of increased volume on container moves at the Port of Wilmington," Clark says. "Lastly, the re-launching of a next-day intermodal rail service connecting Wilmington to Charlotte provides us the ability to play a larger role in integrated manufacturing and distribution supply chains."A Dynamic MarketClearly qualifying as an exceptional region for logistics is the U.S. Southeast, a dynamic market with a strong business and manufacturing base—as well as the fastest-growing population in the country."The Southeast is the only region in the United States that pairs globally competitive economics for advanced manufacturing with a booming population," says Micah Mallace, South Carolina Ports' director of national accounts. "The region's explosive growth drives cargo to the Port of Charleston."South Carolina mirrors the success of the Southeast as it continually attracts global manufacturers, mega retailers, and e-commerce distribution centers. The Port of Charleston's imports and exports rise as more businesses and people move to the state.South Carolina Ports is known for its efficient operations, offering cargo owners reliability, flexibility, and predictability. "SC Ports gives beneficial cargo owners the inventory control they need to hit their KPIs (key performance indicators) with confidence," says Marion Bull, SC Ports' marketing manager.Among its assets: The Port of Charleston features daily express intermodal and merchandise rail services, and CSX and Norfolk Southern both operate large, well-equipped rail yards in Charleston, South Carolina, served by double-stack intermodal trains. SC Ports' RapidRail dray program provides cost-competitive, efficient, and seamless connections between the marine terminals and rail yards.Crucial Connections"Clients locating in the region benefit from fast and economical connections with intermodal hubs across the Southeast, Gulf, and Midwest, including the key markets of Atlanta, Charlotte, Birmingham, Memphis, Nashville, Louisville, Huntsville, and beyond," Bull says.SC Ports also operates two inland ports in South Carolina—Inland Port Greer and Inland Port Dillon—extending the port's reach inland via overnight rail service to and from the Port of Charleston.The inland ports optimize supply chains for companies throughout the Southeast and Midwest, providing an efficient, cost-effective way to move raw materials and finished goods. The 24/7 operations greatly increase truck productivity and flexibility for cargo owners.Widening NetworksIn 2013, SC Ports opened Inland Port Greer, located along I-85 in upstate South Carolina between Atlanta and Charlotte. Inland Port Greer extends the Port of Charleston's reach 212 miles inland by providing overnight rail service via Norfolk Southern. In 2018, SC Ports opened CSX-served Inland Port Dillon, which is located along I-95 near the North Carolina border.Looking forward, SC Ports plans to enhance the state's rail networks and its inland ports, including an expansion at Inland Port Greer. SC Ports also looks forward to the future Navy Base Intermodal Facility, a cargo hub served by both Norfolk Southern and CSX in North Charleston, South Carolina.As a top 10 U.S. container port, SC Ports continually invests in its infrastructure to provide ample capacity, big-ship capabilities, and modern operations to ensure the efficient movement of cargo, says Liz Crumley, SC Ports' corporate communications manager.In 2021, SC Ports will open the country's first container terminal in more than a decade—the Hugh K. Leatherman Terminal—and achieve the deepest harbor on the East Coast at 52 feet."Located in the booming Southeast market, SC Ports has planned and invested to ensure the right infrastructure is coming online to handle future growth," Crumley says.South Carolina is internationally known for its business-friendly environment and strong advanced manufacturing base. In addition to its port operations, the state offers an available workforce, ample land, available warehouse inventory, and a strong logistics network of highways and two Class 1 railroads. Additionally, Charleston has not seen labor rate pressure during the pandemic, Mallace says.SC Ports is particularly well-suited for moving goods just-in-time for global companies with demanding supply chains, Crumley says. The port doubled cargo volumes over the past decade, in large part by supporting advanced manufacturers such as BMW Manufacturing Co., Volvo Cars, Mercedes-Benz Vans, Michelin, and Continental Tire.The port is further expanding into the retail, omnichannel, and e-commerce space by ensuring the swift movement of goods through a reliable supply chain and by supporting distribution center developments.One such effort bearing success follows the port's decision to buy 1,000 acres in Dorchester County, South Carolina, which helped entice Walmart to build a $220-million distribution center on the port-owned site. Walmart plans to break ground at the Ridgeville Commerce Park in March 2021.By Land and By SeaSometimes the recipe for success comes down to this: Add water. Surely that is the case when the main ingredient to which the water is being added is a robust market. The Sunshine State illustrates this point."Our area, the Central Florida region, is one of the fastest-growing markets for logistics and distribution," says Raul Alfonso, executive vice president and chief commercial officer of Port Tampa Bay."Fueled by Florida's steady growth, our market region along the I-4 Corridor is approaching 400 million square feet of distribution facilities, with 10 million square feet of new distribution facilities under construction," he says. "These distribution centers service a population of 10 million and more than 70 million tourists that visit each year."The uniqueness of this logistics and distribution hub is that it was not until 2019 that we had direct ocean services from Asia and Latin America," Alfonso adds. "Prior to this, the market had been dependent on using other faraway ports and expensive trucking solutions."As we change that, we are attracting new ocean services to help the many retailers with more efficient supply chain solutions," he says.Enhancing AssetsNatural resources and proximity to market count for little, however, if regional leadership does not understand and appreciate those assets. Asked to cite the essential points he would list if approached by a colleague or site-selection professional about where to place a manufacturing or distribution facility, Alfonso begins by speaking about the importance of a "business-friendly" environment."Depending on the type of manufacturing, the choice of the right site for a manufacturing and/or distribution facility involves a combination of factors," he says. "These include positioning in a business-friendly location, from a city or state with tax advantages to having supportive agencies and utility services providers, the proper labor pool, and infrastructure to support the company's transportation requirements."Fortunately for Florida, and Tampa Bay in particular, those factors exist in abundance in and around Tampa Bay."Having proximity to a diverse port with excellent infrastructure and market accessibility to major consumer markets is also key, especially in these days of e-commerce and fast-changing retail and consumer trends," Alfonso says."Being able to access raw materials from global and domestic suppliers is another key that ties together with the movement of products to both domestic and international markets," he notes. "The importance of the availability of an efficient port is highlighted when a company's business plans include exports to global markets."Economic PowerhouseAs Florida's largest port by land area and cargo tonnage handled each year, Port Tampa Bay is the largest economic engine in West Central Florida—which translates into attracting new capital investment to the region, helping to create jobs."Our diverse portfolio of tenants fuels the region's energy requirements, helps build the homes to serve our growing population, and brings consumer goods that are purchased and distributed via retail centers or e-commerce outlets," Alfonso says.With all these advantages, the port is not simply treading water to stay afloat. "We have been very busy handling new cargo products, signing new leases for bulk terminal operations, and expanding other operations," Alfonso says.One example is Port Tampa Bay's efforts with partners such as Ports America, the largest terminal operator and stevedore in the United States, with operations in every major port in the nation.Forging AheadPorts America has been instrumental in Port Tampa Bay's container terminal expansion and acquisition of new cranes as well as the port's completion of the Port Logistics Refrigerated Services facility expansion. The facility now serves importers and distributors of perishable food products.Port Tampa Bay also will soon break ground on a new rail-served transloading facility across from the two terminals.Also partnering with Port Tampa Bay is the State of Florida itself, through its legislative budget and grants, as well as support for capital investments in infrastructure from the Florida Department of Transportation. "The state sees Port Tampa Bay's vital role in Central Florida growth," Alfonso says."Unlike others, we are fortunate to have sufficient land where we plan to develop an efficient logistics and distribution park, connecting our port's cargo terminals, with excellent market accessibility by road and rail," Alfonso says. "We are rerouting Florida's logistics thinking."
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