Intermodal rail growth drives warehouse construction near hubs
- Cities like Atlanta, Chicago and Dallas are experiencing growth in industrial real estate construction stoked by the rising role of inland rail hubs near those cities, according to a recent report from JLL Research.
- "There is a direct linkage to rail volume growth and warehouse inventory growth," the report said, which puts the growth in industrial real estate in those three markets at 3-12% in the last five years.
- Some of this growth is coming from the railroads themselves as Class I railroads begin massive infrastructure and technology improvements seeking greater efficiency.
Railroads have gained a fair bit of business in light of 2017 and 2018's trucking capacity crunch, shifting the warehouse needs of the U.S. and bringing more industrial development to cities with hubs for intermodal rail.
Increased traffic between coastal ports and inland transit hubs have led to non-stop or expedited service, making cities near these hubs desirable for warehouse renters.
"These non-stop 'hot trains' typically have fewer delays for the end user, as containers may only be handled or 'touched' two or three times before arriving at the beneficial cargo owner’s (BCO) loading dock," according to the report.
JLL's Director of Research George Cutro told Supply Chain Dive that intermodal yards act somewhat like 3PL sort centers — serving as a bridge between coastal ports and shipper pickups.
If you have thousands and thousands of containers coming in via ship, it makes more sense to pick them up at an intermodal yard than to try to truck them to your warehouse," said Cutro, adding that large retailers heavily reliant on imports are more likely to seize on these rail hub adjacent cities than 3PLs, for example, which are more likely to be receiving product from domestic manufacturers.
JLL posits that in light of current work by railroads in the areas of infrastructure and efficiency, the growth in rail freight is unlikely to subside and the construction growth along with it — especially because some of this growth is coming from the railroads themselves.
"Some of it has to do with the fact that their infrastructure is outdated and needs to be updated. They’re adding capacity, they’re adding sidings. They're finding areas where they can make the tracks wider and have some areas where they can go a little faster," said JLL Research Manager Chad Buch. And where the rail capacity grows, developers will follow close behind.
Follow Emma Cosgrove on Twitter