Exports mark the spot for inland port growth, says Jones Lang LaSalle

Following up on a white paper it issued last year on inland ports and their increasing importance as a critical link in the global supply chain, a new white paper from global real estate firm Jones Lang LaSalle (JLL) explains how an increase in U.S. exports is driving the need for more U.S.-based strategic inland ports.

According to JLL, by definition, an inland port is a hub designed to move international shipments more efficiently from maritime ports inland for distribution throughout the U.S. heartland. The firm added that while the concept of inland ports is not new, where they are located is becoming increasingly critical to the global supply chain and affect logistics decisions ranging from shipping routes to warehouse locations.

In the white paper, JLL cites three main factors that are front and center in terms of making the case for inland port development: U.S. export growth, including agricultural products sent to China; increasing fuel costs spurring intermodal and rail usage; and growth in containerized shipping.

In an interview with LM, John Carver, head of JLL’s Ports Airports and Global Infrastructure Group, said that as the real estate industry really began to make the connection between ports and inland real estate, it initially focused mainly on import activity. The reason for this, he said, was that most developers and investors are comfortable with building warehousing, distribution, and logistics-based industrial real estate facilities.

“But the reality is that only addressed half the business and to even to be able to only drive that half, there needed to be a solution for the other side, which is the export side,” he said. “One of the takeaways we are trying to get across is that for those developers that are able to attract the export piece, they will find their projects in much better position to handle the import piece well. This is for large-scale inland port projects. They have to be providing for the export piece in order to really attract large shippers to come in, because if they don’t empties (empty containers) are going to pile up in shippers’ warehouses and have nowhere to go once they are off-loaded from ocean carriers.”

Historically, Carver explained that the export side has not been a real attractive piece for the development community and does not always result in large-scale industrial buildings. Instead, exports tend to be geared towards more outside storage or green silos or commodity-specific things like hay-bailing operations, according to Carver. But exports can be leveraged for viable land uses and leverage truck and rail traffic in order to attract warehousing on the inbound side.

JLL’s onus on U.S.-based exports is not a stretch by any means. The white paper points out that according to the U.S. Department of Commerce U.S. exports of goods and services in February 2012 hit $181 billion, which set a new monthly record, and 2011 exports—at $2.1 billion—topped the previous high in 2008 by almost $300 billion. According to Commerce, U.S. exports to China in 2011 increased 12 percent and topped $100 billion for the first time.

“The message we are trying to get out to developers is: ‘look at the export piece,’” said Carver.

One of the inland ports referenced in the white paper, Casa Grande, AZ-based Inland Port Arizona—was driven as an export project. But with a strong export business, Carver said the biggest problem is getting enough containers to fill up and send back to ports.

Inland Port Arizona, in which JLL serves as a global marketing partner, is largely supported by one of the largest providers of containerized hay and alfalfa, which is baled and shrink wrapped and stuffed into containers and shipped to Asia-Pacific markets. 

“This shipper developed Inland Port Arizona to attract importers to the Arizona marketplace that will find value in having empties being shipped back to their origin destination,” he said. “This port will be served by Union Pacific, with direct access to the Port of Long Beach.

Other notable inland port locales include Chicago, Memphis, St. Louis, and Kansas City, according to JLL. And it added there are new locations under development, including a 4,000-acre inland port in St. Lucie, Fla. Inland Port Arizona.

Carver explained that demand for inland ports is growing, because it is topical from the real estate side, as well as railroads and truckers, and logistics service providers.

“They are all stakeholders in this concept and all have areas to grow with it, too,” he said. “It is getting a lot of traction. The trend is going towards at least one mega logistics center connected to a specific port system alongside a traditional 200-acre multi-building development. There is a big advantage for shippers to be situated within a project that has access to rail lines, as opposed to being miles away and having to rely on a lengthy truck haul.”

What’s more, Carver said is railroads looking at locations where intermodal projects are being established and securing chunks of land around these locations and building intermodal ramps and buying land around it and auctioning it off to the development community. In some cases, he said railroads are picking locations and then opening it up to the development community.  He cited how Class I rail carrier CN is developing an intermodal project in Memphis and working with JLL to bring in development capital to build a complimentary 1,000-acre park around it.