Site Selection: The Rise of Intermodal

Rail intermodal—transporting ocean shipping containers and truck trailers on railroad flatcars—has been the fastest-growing segment of the U.S. freight railroad industry for years, according to the Association of American Railroads (AAR). Intermodal accounted for 21 percent of revenue for major U.S. railroads in 2011, second only to coal among all rail traffic segments.

Exports and imports account for about 55 percent of U.S. rail intermodal traffic, with purely domestic movements making up the remainder, the AAR reports. The domestic share of total U.S. rail intermodal traffic has grown in recent years, with much of the increase consisting of freight that used to move solely by truck, but has converted to a combination of truck and rail movements.

U.S. rail intermodal volume rose from three million containers and trailers in 1980 to more than 12 million in 2006 and 2007, according to the AAR. After a recession-driven drop in 2008 and 2009, intermodal volume rebounded to 11.9 million units in 2011.

Clearly, logistics professionals recognize that in order to traverse the miles safely and efficiently, it is wise to climb aboard the railroads. As a result, outstanding rail intermodal sites—where the nation’s Class I railways and numerous regional rail lines connect with major highways and ports—have emerged.

Creating the Perfect Spot

Combining as many logistics advantages as possible to create the perfect mix of resources helps companies get product to market in the shortest time possible. Seldom do all the factors align as a pure act of nature and geography. Great logistics sites are constructed as much as they evolve organically.

Such is the case with the I-57 Logistics Center in Marion, Ill., a modern, 1.1-million-square-foot distribution center located just off the interstate. Industrial architect McGregor designed the facility, built in 2000 by IDI and now owned by Dalfen America Corp., a private equity firm specializing in real estate and real estate-related investments. The firm acquires, develops, owns, and manages millions of square feet of premier commercial properties throughout the United States and Canada through its Canadian arm, Dalfen’s Limited.

Among the numerous logistics advantages of Dalfen’s I-57 Logistics Center is its location across the street from the Williamson County Airport.

"Shippers who need air freight as a component of their transportation program will benefit from the proximity," says Steven Kohn, senior vice president of Colliers International, the real estate firm marketing the site for Dalfen.

The site also has the benefit of dual rail access to both of the area’s Class I railroads, BNSF and Union Pacific. Dual rail access provides a distinct competitive edge.

"Site selection teams want flexibility, and leveraging the power of rail provides it," Kohn explains. "Sites that have the flexibility of dual rail will get leased first.

"The I-57 location fits into most distribution networks," he adds. "That’s the number one reason the facility was sited there. More than 120 million people live within a 12-hour drive of the site."

The facility’s network includes the key cities of St. Louis, Nashville, Memphis, Louisville, Indianapolis, and Chicago.

"Location is vital for intermodal," Kohn notes. "Being in the center of a large population puts you close to the end user."

The I-57 Logistics Center lets site selection teams check off all the boxes on their logistics wishlist. The facility features a 35-foot clear ceiling height; high-output T-5 lighting with motion sensors; 200 existing trailer parking spaces, expandable to more than 400; a fully fenced site with secured perimeter and guard stations; and two segregated staging areas for more than 40 trucks combined.

Companies choosing to operate from the I-57 Logistics Center’s location in Marion’s business-friendly environment benefit from low real estate taxes with available economic incentives and potential tax abatements; wage-offsetting programs; job-creation tax credits; and training incentives.

The Marion community also offers a highly qualified, educated, low-cost labor market. And, there’s the potential of gaining Foreign Trade Zone status.

Service Providers as Partners

Intermodal transportation and geographic resources are immaterial without the services that enable companies to take advantage of the location.

Consider, for example, the role of Hoosier Energy in the sprawling region it calls home.

"Hoosier Energy serves a wide swath of the central U.S. Midwest, stretching from near St. Louis to the Cincinnati suburbs," says Jeff Quyle, economic development coordinator for the electricity provider. "Its service area is approximately 250 miles wide, which puts more than 20 major markets within a one-day drive."

Three Class I railroads serve the area. In addition, three major airfreight hubs—UPS, FedEx, and DHL—are located in the region, and six interstates run through it. If that were not enough, inland ports on the Ohio River are models of efficiency.

When it comes to intermodal service, the region has it all—and its advantages are fully exploited.

"Indianapolis and Louisville have established reputations for concentrated logistics investments and labor forces," says Quyle. "It all adds up to an existing and growing logistics focus."

The Hoosier Energy Power Network—which provides electricity to developed sites and industrial parks along the I-70, I-65, I-64, and I-74 corridors—plays an active part in that focus.

"Hoosier Energy’s approach to logistics sites is to partner with communities and property owners to help add value to their sites," says Quyle. "We can do everything from taking aerial photography and assisting with geotech work to providing electric power reliability reports or co-marketing the site.

"The local economic development community knows the area’s strengths already, and they can call on us to fill in the missing pieces," he adds.

Hoosier Energy is regularly cited as one of the most effective economic development utilities in the nation. It’s all about establishing successful partnerships.

"Morgan County has rail-served sites located near major highways with infrastructure in place or nearby," says Joy McCarthy Sessing, executive director of Morgan County Economic Development Corp., based in Mooresville, Ind. "One of these sites is on a four-lane, divided highway that provides quick and easy access to I-70 and I-465."

Hoosier Energy is a major reason. "Hoosier Energy has been a longtime leader in certifying industrial sites as shovel-ready," says Steve Witt, president of Terre Haute Economic Development Corporation.

"One example is the 195-acre Indiana Economic Development Corporation shovel-ready certified site in the Vigo County Industrial Park," Witt says. "This site is one of dozens of shovel-ready certified sites served by Hoosier Energy that stand ready to engage in commerce created by existing rail intermodal infrastructure in south central Indiana."

Powering Through

Like Hoosier Energy’s partners, businesses researching intermodal sites in North Carolina also benefit from services related to electricity providers. As easily as flipping a switch, site-selection professionals can order a detailed report on sites in the state that precisely match their specifications. Within 48 hours, ElectriCities of North Carolina will send profiles of locations that meet the company’s requirements.

ElectriCities serves more than one million customers, including members in South Carolina and Virginia. The not-for-profit government service organization represents cities and towns that own electric distribution systems within the state.

The agency knows well the capabilities of its 90-plus member communities, from site availability and intermodal infrastructure to quality of life and number of golf courses.

Using ElectriCities as an introduction to North Carolina, site search managers have a turnkey or "flip-switch" information source. "They find all the information they need in one place," says Brenda Daniels, the organization’s economic development manager.

ElectriCities developed two industrial parks it dubs "Prime Power Parks" in the cities of Albemarle, located in the Piedmont region’s lake country, and in Gastonia, located 15 miles from Charlotte, just off I-85.

The Albemarle park has direct rail access from Charlotte/Douglas International Airport, making the area a prime rail intermodal site. In addition to a flexible electric rate structure and pro-business climate, the location provides easy access to eastern U.S. markets.

The industrial parks are North Carolina Certified Sites with four megawatts of on-site backup power generation. "If a company has a critical operation that can’t risk a power outage, they have a backup available, so they don’t have to purchase a generator," Daniels notes.

The backup, like the rate-lowering services to all ElectriCities’ customers, provides an ongoing incentive for companies looking for an ideal logistics location. It is not surprising that ElectriCities has generated increasing interest from companies seeking a great place to call home.

"We’ve seen a measurable uptick in interest and activity over the past 18 months," says Daniels.

ElectriCities remains a partner through the entire site-selection process, helping companies with utility-related issues by arranging site visits and facilitating contact with local, county, and state officials.

But the most important factor in the area’s growth is the availability, reliability, and affordability of public power.

"It’s no coincidence that some of the state’s most dynamic growth has occurred in our public power communities," says Daniels. "Advanced manufacturing, food processing, metal-working, plastics—any power-intensive industry finds significant advantages here."

Companies based in ElectriCities member communities recognize the cost efficiencies and superior customer service public power provides. Municipal utilities don’t have to pay dividends to shareholders, and those savings can be passed on to the utilities’ customers. Both ElectriCities and the member utilities work closely with companies to help them manage their power usage and keep costs down.

A mixture of high capacity and low cost remains the driving force in logistics. And rail intermodal sites that complement their geographical advantages with outstanding and cost-effective services lead the pack.

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