Illinois-Missouri Bi-state Region: Logistics Center of Attention

The St. Louis region has always been a center of attention. Its location down river from the Mississippi River’s confluence with both the Illinois and Missouri made the city an important nexus for frontier traders. It was the point of departure for the Lewis and Clark expedition. At one time during the late 19th century, St. Louis was the fourth-largest city in the country.

The Gateway Arch, completed in 1965, was built to mark the city’s role in U.S. Manifest Destiny, the spirit of 19th-century westward expansion. It became and remains a center of attention for tourists and marketers alike.

Today, the arch also symbolizes synergy and business expansion. It begins at two separate loci, then joins as one at its apex—a representation that demonstrates how the area’s economic development prospects are buttressed by collaboration between public and private sector interests on both sides of the Mississippi River, in Illinois and Missouri.

Consisting of 15 counties that are collectively home to more than 2.8 million people, the St. Louis metro area’s footprint extends into both states. The Mississippi River plays a big role in area economic development activity. It’s one asset that many U.S. cities don’t have. And it has become a trigger for greater collaboration between interests on both sides of its banks.

Room to Grow: Industrial Real Estate Snapshot

Businesses looking for facilities in the St. Louis metro area can choose from a variety of options—and new construction is booming. (Source: Cassidy Turley Commercial Real Estate Services Industrial Market Snapshot, Second Quarter 2011)

Property Type	Total Buildings	Vacancy Rate	Under Construction
Modern Bulk	83	16.9%	0
Traditional Bulk	235	12.8%	180,000
Office/Warehouse	4,041	7.4%	0
Manufacturing	565	4.5%	105,000
Service Centers	321	7.9%	129,000
Other	129	10%	0
St. Louis Total	5,374	8.7%	414,000

 

"Two excellent examples of this cooperation are the new bridge that will span the Mississippi River, funded by both states and the federal government, and the joint planning that went into creating the new south harbor at America’s Central Port, formerly Tri-City Port District, in Madison County, Ill.," says Alan J. Dunstan, chairman of the Madison County board.

"Leaders in Madison County and throughout Illinois and Missouri understand the Mississippi River’s importance to our area’s vitality," he adds. "We continually work together to maximize the river’s viability as one of the key, successful elements to our area’s position as a transportation and distribution hub."

Powering Collaboration

Such bilateral cooperation and vision has been stewarded by the area utility, Ameren Corporation. With operational bases in both Illinois and Missouri, the power company generates a net capacity of 16,600 megawatts of electricity and serves 2.4 million electric customers and nearly one million natural gas customers.

Ameren operates one nuclear facility, three hydroelectric plants, and more than one dozen combustion turbine facilities. The utility has an abundance of power. It also has the capacity to attract business development interest for the benefit of all.

"Utilities have had long-term involvement in economic development activity because we are part of the core infrastructure," says Mike Kearney, manager of economic development for Ameren Corporation. "We collaborate with communities, state governments, and businesses to bring greater value to their operations."

Making Connections

In the Bi-state Region, Ameren is literally and figuratively the current that flows between enterprises. There are few entities, public or private, that cover as broad and comprehensive a geographic region—crisscrossing local, county, and state jurisdictions—as the utility does. It is in a position to make connections around assets that drive the region’s economy, especially with regards to transportation infrastructure that includes a dense network of rail, river, road, and air options.

Naturally, Ameren has a vested interest in growing business activity in the St. Louis area. Manufacturing, distribution, and logistics industries consume a lot of electricity, which is incentive for any power company. But growing critical mass helps increase service and reduce costs.

"Our priority is serving customers," says Kearney. "But we also have an important role in growing our region: building capacity, and making our businesses more competitive."

In this regard, alignment is key. Local communities can try and go it alone, but it is difficult finding and capitalizing on resources that may not be immediately apparent or accessible. One of Kearney’s primary objectives at Ameren is to facilitate more dialog among city, county, and state governments. The objective is to tap base synergies, capitalize on regional strengths, then compete locally.

"More business leaders are looking to create a strategy in concert with the public sector," says Kearney. "It is private-public partnership in the truest sense. More players in specific cluster industries are going to grow their business here."

Hazelwood Blooms

Hazelwood, Mo., is one of the many benefactors of this economic development approach. With a population of nearly 25,000 residents—among the largest communities in St. Louis County—it is also home to more than 1,000 businesses, including 12 Fortune 500 companies, six Fortune 1,000 companies, and 10 corporate headquarters.

Proximity to Lambert-St. Louis International Airport has always been an advantage for Hazelwood. But it also provides convenient road access to U.S. Interstates 70, 44, and 55, as well as U.S. Highway 40 and Interstates 170, 270, and 370. On the rails, Norfolk Southern provides freight service directly into the city.

Hazelwood is the perfect example of a community that was hit hard by a loss of automotive manufacturing but is reinventing itself as both a manufacturing and distribution hub. In 2006, Ford shut down its Hazelwood manufacturing plant, eliminating approximately 2,000 jobs and $3 million in annual revenue for the city. That vacant site has since been repurposed as Aviator Business Park, a 2.7-million-square-foot mixed-use development aimed at light manufacturers, data centers, distribution operators, and other commercial clients.

Together with the Hazelwood Logistics Center, a 151-acre, rail-served industrial and distribution park with retail frontage, Aviator Business Park has become a magnet for new business expansion.

"With Aviator Business Park and Hazelwood Logistics Center, the infrastructure is there—roads, rail connections, power, and gas," says David Cox, economic developer for the city of Hazelwood. "Companies don’t have to start from scratch."

Cox conveys the growing enthusiasm permeating the community. "We’ve been working with the St. Louis Regional Chamber and Growth Association (RCGA) over the past year to bring Emerald Automotive to Hazelwood," says Cox. "The company came to us looking for a central location in the area. The Ford and Chrysler facilities in nearby Fenton, Mo., both closed, so a talent pool with automotive assembly skills was available."

The deal, which was finalized in summer 2011, will bring the British automotive company’s production of hybrid electric and diesel-powered delivery vans to Hazelwood. The plant will create hundreds of manufacturing jobs, and the site will eventually become Emerald’s North American manufacturing hub.

"The Hazelwood plant will manufacture three prototype vehicles—two likely targeted for Europe, the other for North America," says Cox. "Once Emerald develops these markets, it will set up an assembly facility here, which will make chassis and engines. Those will be sent to Europe via rail and ocean for final assembly."

Location, transportation accessibility, and workforce were primary considerations in Emerald’s decision to choose Hazelwood over 24 other sites. But it also had an ace in hand. The city is planning to loan Emerald $3 million, to be paid back with interest in 10 years or fewer. Another $2 million is coming from the state.

"We, along with about seven other cities around the state, have a half-cent sales tax dedicated to economic development," Cox explains. "We’ve been able to complete some projects in our industrial parks, such as rebuilding a street and putting in a turn radius, using our economic development fund."

Hazelwood also created a loan program that is available to prospective companies. "Emerald came here because of our loan program," Cox says. "Hazelwood was the only community that could offer that."

At Home in Hazelwood

The city has had other successes attracting new business and retaining existing ones. Community Tire, a wholesale tire distributor for the region, was located in an undersized warehouse facility and was able to expand in Hazelwood—because it wanted to stay there.

Cox has also seen a trend of area businesses relocating from older facilities. "In fall 2010, Luxco, a national liquor distributor, came to Hazelwood because its distribution center in the city had grown obsolete," he says. "Food distributor M&L moved operations here, too. Many companies are consolidating locations in Hazelwood because it offers space and transportation accessibility."

Hazelwood’s courting of Emerald Automotive is by no means an exception in the St. Louis market. Several multinational companies have headquarters or significant operations nearby—notably Boeing Integrated Defense Systems, Emerson Electric, Monsanto, Express Scripts, Energizer Holdings, Panera Bread Company, and Hardee’s Food Systems.

"Because of the region’s distinct position in wholesale trade and its multimodal access to North American markets, St. Louis offers great advantages to global manufacturers, value-added agricultural operations, and energy producers," says Patrick McKeehan, executive director of Leadership Council Southwestern Illinois, an economic development organization that serves Madison and St. Clair counties.

As a consequence, the area also attracts transportation and logistics talent. Headquartered in Fenton, Mo., UniGroup is the parent company of Mayflower, United Van Lines, and newly spun-off third-party logistics provider UniGroup Worldwide Logistics.

"We manage projects all over the United States and the world. Being in an area that has grown to be a significant transportation and distribution hub helps us because of the critical mass that is building here," says Rich McClure, president of UniGroup. "Several companies have more than one million square feet of distribution space, including Worldwide Technology, Unilever, and Procter & Gamble. These assets, talent, and customers give the region a logistics advantage."

China Direct

Critical mass is the key. And now area economic developers and government officials are hoping to further capitalize on existing transportation assets by bringing global markets closer to St. Louis. Such is the vision of the Midwest-China hub at Lambert-St. Louis International Airport.

The project is a public-private trade effort between mostly St. Louis and Missouri government officials and business interests in China. The idea, hatched in 2009, is to attract Chinese air carriers to Lambert and create an aerotropolis around this trade. On Sept. 26, 2011, China Eastern landed its inaugural cargo flight from Shanghai, with weekly service expected to continue in the short term.

The China hub is a "business expansion and retention strategy," says Kearney, as well as a magnet for new companies. When David Cox was entertaining interest from Emerald Automotive to locate in Hazelwood, the manufacturer was intrigued by the hub negotiations.

"Even though Emerald won’t be putting vans on airplanes, the idea that the area is attracting greater interest from the international community is a plus," says Cox.

Air Cargo Assets

On the Illinois side of the Mississippi River, a different air cargo strategy has been in place since 2004, according to Tim Cantwell, director at MidAmerica Airport, a military-civilian joint-use airport in St. Clair County, Ill., with operations experience handling international cargo. It has been coordinating trade missions and operations for air cargo routing between Asia and South America for the past seven years.

MidAmerica offers two runways, as well as interstate access via I-64, I-44, I-55, and I-70; an air cargo terminal; air cargo facility development space ranging from 10 to 200 acres; and a foreign trade zone. But perhaps its biggest asset is a global strategy that establishes a new trade route between South America and Asia through the St. Louis area.

"Our value proposition is market-based," says Cantwell. "It connects foreign buyers and U.S. sellers, and sets up their export trade between the United States and South America, and the United States and Asia, with logistics improvements for their current needs. We are trying to add Midwest businesses eager to export, and U.S. cargo carrier operations, but we’ll allow anyone in. To start this type of activity where it has never been hosted before required improving or offering alternatives to currently established markets."

In effect, MidAmerica Airport aims to be the transshipment pivot in a new trade route between Latin America, North America, and Asia.

"Trade between the United States and Latin America requires smaller, lesser range aircraft due to smaller consolidated loads at single points of origin and less advanced runway environments," Cantwell adds. "Air trade between the United States and Asia demands larger aircraft. Airports engaging in air trade have longer runways to support that need."

A Trade Conduit

At some point, explains Cantwell, regauging activity is necessary to put cargo onto different sized aircraft and maximize load efficiency. Currently, the regauging of intercontinental U.S. transient airfreight trade occurs via airport-to-truck, truck-to-truck, then truck-to-airport with laborious efforts connecting Asian gateways and Miami. And the reverse is the same.

That’s where MidAmerica’s business plan comes into play as a trade conduit, introducing U.S. sellers to Latin American and Asian buyers, as well as augmenting the Asia-to-Latin America trade through the U.S. Midwest.

MidAmerica Airport is aggressively creating business ties throughout the Midwest, and is adding sellers from as far as New England, Florida, Mississippi, and Texas. Of course, the anchor for the export business is in Illinois.

Both the South America-U.S. and U.S.-China lanes are light, but there is a need to grow based on standard of living increases on both continents, says Cantwell. "The air cargo equation must be made economically viable for the trade route to be successful," he notes. "This new trade route has reached the commodity level of consciousness with buyers who want a safe, secure, certified transportation process for their goods."

Working the two trades has enabled Cantwell to identify unique best practices that he has capitalized on to target new business opportunities.

"MidAmerica has established the tools and knowledge base to provide for perishables handling," he notes. "This capability is critical for the new lines of U.S. exports to China: high-value proteins and processed foods. We learned that handling ability from South American flower and vegetable import operations. We are expanding perishables operations by building a 30,000-square-foot perishable center in a public-private partnership with an established U.S. cooperative that distributes fruits and vegetables internationally."

MidAmerica sought out the needs of Asian and Latin American suppliers to identify goods that require air transport between continents. The basis for this understanding is that air freight is traveling through the United States, and most of it is designated to LTL carriers for delivery from airports in the north and west to the Southeast, or vice versa.

"MidAmerica provides a solution that eliminates truck transit, labor handling, and repacking, reconsolidating, and repalletizing goods, as well as the information loss and frustration of crossdocking multiple times en route," Cantwell says.

If MidAmerica’s global vision and cargo-specific handling capabilities aren’t incentive enough for businesses to locate in the vicinity, there’s also the convenience of being located next to Scott Air Force Base—another major boon for the Bi-state Region.

"Because Scott Air Force Base is home to all the U.S. military’s logistics command and control functions, the area possesses a workforce that is readily available and knowledgeable in that field," Cantwell adds. "We’ve got the right tools and operations to meet the growing foreign demand for U.S. goods. We can make U.S. export via air cargo an easy reach to the world."

America’s Intermodal Center

Global air transport aside, St. Louis has always been the historic gateway to the American West, providing a centrally located, cost-effective jumping-off point for river, rail, and road cargo, says McKeehan. Around the Mississippi River, intermodal options abound.

St. Louis is home to the nation’s second-largest inland port by trip ton-miles. With six Class I railroads and several smaller industrial railroads, the area is also the nation’s third-largest rail center. Four interstate highways and four interstate linkages pass through the region, placing St. Louis at the nexus of the United State’s primary north/south and east/west corridors.

"Madison County and the entire St. Louis region benefit from having more intersecting transportation modes than any other area of the country," notes Dunstan. "Its strategic location in the center of the country enables items shipped from the greater St. Louis region to reach 70 percent of the country’s population within 48 hours."

But at the core of this intermodal crossroads is the hard-to-miss Mississippi River and America’s Central Port, formerly the Tri-City Regional Port District. Officials changed the name in 2010 to better reflect the port’s growing value proposition.

"The name ‘America’s Central Port’ helps identify the port’s location in the country and its intermodal transportation business for potential new customers," says Dennis Wilmsmeyer, the port’s executive director.

Located just north of downtown St. Louis on the Illinois side of the Mississippi River, the port and its tenants offer a wide range of services and facilities, including barge, rail, and truck transfer of commodities; industrial, commercial, and residential development sites; and warehouse and commercial lease opportunities. The 1,200-acre multi-use site has more than 1.5 million square feet of warehouse space, most of which is rail served.

Barge Business

Among the port’s tenants, Lewis & Clark Marine Inc. operates nine vessels on a section of the Mississippi River between miles 162 and 198, below the confluence with the Missouri River. It is primarily responsible for switching and fleeting barges in the Greater St. Louis area.

"Barges are delivered to our fleets by long-distance vessels," says Paul Wellhausen, president, Lewis & Clark Marine. "Then, as a harbor service, we receive orders to shift barges to a terminal to load or unload. Barges dropped in our fleet can be consigned for pick-up by a line-haul vessel for further movement either northbound or southbound from St. Louis to load or unload elsewhere."

Lewis & Clark will "fleet" (essentially, valet parking for barges) dry cargo barges containing various products, as well as liquid barges. Fleets loaded with coal, ethanol, and countless other commodities deliver power to domestic utilities and grain to global markets, demonstrating why the St. Louis inland water system is well-suited for all types of industrial activity. And with transportation costs continuing to soar, intermodal transport on the Mississippi River is a valuable asset for many businesses.

America’s Central Port markets its services nationally and internationally to distribution and manufacturing companies that can take advantage of its central location, and excellent river, rail, and highway access. Having three transportation modes on its property provides tenants the opportunity to scale mode with business need.

Further expansion of the port’s rail loop, scheduled for completion later in 2011, and a new South Harbor—funded by a $8.5-million Transportation Investment Generating Economic Recovery grant—will add capacity and allow the port to provide customers even more options.

The importance of the river and port in economic development for the St. Louis region can’t be understated, says Wilmsmeyer. "What would happen if the river were no longer here? How would freight move? Could the rail lines and the highways even begin to absorb the volume of displaced freight? Or would the lack of the river cause freight to move to other cities?" he asks.

"The bottom line is that the Mississippi River is a true asset," Wilmsmeyer continues. "Regional businesses and government need to continue to work together to better plan and use it to benefit the area."

Ameren’s Mike Kearney is optimistic that there will be a resurgence of manufacturing activity in the St. Louis area, supported by further capital investment and a skilled workforce. With a full plate of transportation options across all modes, there is a healthy mix of new and old industries, which creates a more resilient local economy.

Bi-focal Vision

Such diversity also presents new opportunities to provide end-to-end supply chain capabilities—raw materials sourcing to finished goods movement—in some verticals. With the infusion of South American and Chinese trades, cluster development is likely to continue at pace.

But the Bi-state Region’s greatest asset is its collaborative vision for growing economic development opportunities. The Missouri side of the Mississippi River has St. Louis, Lambert-St. Louis International Airport, and a well-entrenched commercial footprint. In Illinois, there is ample room for growth around America’s Central Port and MidAmerica Airport.

"For economic development purposes, the Bi-state Region leverages assets very well," says McClure. "Both sides of the river offer tremendous resources. There’s plenty of reason to see the river not as a dividing line, but as an asset."

For information on featuring your region in an Economic Development Supplement, contact James O. Armstrong at 314-984-9007.