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Issue 9 2019 - FBJNA


///TRANSPORT & WAREHOUSING DCs are Fast on the Move By Karen E. Thuermer


Today’s logistics requirements are resulting in a myriad of challenges and a host of opportunities for 3PLs. On the retail front, consumers demand and expect fast deliveries, a precedence set forth by Amazon’s investment in next- and same-day deliveries. This, in turn, has impacted warehouse and distribution center development as well as the real estate sector, which is experiencing high demand for space. Also impacting DC markets


today are tariff negotiations between the Trump Administration and Chinese President


Xi Jinping. The


indecisive nature of where these are heading has resulted in companies nationwide stockpiling goods from China and stuffing warehouses to capacity. “Almost every place in the


country is severely constrained,” says David Egan, global head of industrial logistics research, CBRE. “And the options are new sites are tougher.” Today’s warehouses need to


be able to accommodate material handling systems and equipment, taller ceiling heights, and adequate internet bandwidth; as well as provide ample space for trucks to move in and off of the site without restrain – in addition to good access to road, rail, ocean or air transport networks. The trend for time-specific


deliveries is especially accelerating last mile concerns, causing many DCs to be located near urban centers to be closer to consumers, which brings up other concerns: truck driver shortages and ample skilled DC workers.


Hot Markets


Today top markets for warehouse development are everywhere. CBRE’s Egan points to Middle America locations such as Atlanta, Chicago, and Ohio down through Tennessee, Kentucky and the Carolinas as hot, as are New York/ New Jersey, Washington, DC- Baltimore, South


Florida, infill


California, and Seattle due to their high populations. He warns, however, that big


city locations have entry barriers such as scarce and, therefore, expensive land; environmental sensitives; high construction


costs; and challenging zoning and entitlement processes. Secondary markets -- such as Las Vegas, Austin, Portland and Reno, have high construction costs, low vacancy rates and new peak rents like primary markets. Access to markets is the


primary concern. That’s why over the summer, Sterling Transportation began operations in Houston, offering 2-Day Express Service to Florida, and, to cover the state of Texas, added service from Dallas. “We are committed to bringing


our ‘Sterling’ service to Texas. Houston was a great start, but we think there is a ton of business in Dallas also,” said Keith Davis. Founder & CEO of Sterling Transportation. “To effectively serve the market, we felt it was best to open an office and put people in place.” In addition, in October Sterling announced


Transportation


that its Miami terminal retained official Container Freight Station status with a Firm Code of LBZ0 and an IBEC (In-Bond Export Consolidator). The Miami terminal is a state-of-the-art 35,000 sq. ſt. stand-alone building with 24-hour security. It is open 7 days a week and is conveniently situated minutes from Miami International Airport. A company press release adds:


“We are U.S. Customs bonded and offer 3-Day service from Florida to the West Coast with regular departures on Tuesday and Friday. We also provide full & partial truckload and specialized equipment logistics through our sister company, Sterling Brokerage Services.” Locations at or near seaports,


airports, intermodal hubs, and inland ports are particular attractive. Expansions at the Port of New York/New Jersey has resulted in millions of warehouse space along I-95 and into Pennsylvania’s Lehigh Valley. Rickenbacker International Airport, which brings in large volumes of goods for big box retailers in the Midwest, has spurred significant DC development in the Columbus, Ohio, region, as has the BNSF intermodal hub in Kansas City, KC. Jamie Overley, CEO of East


Coast Warehouse & Distribution, a leading temperature-controlled


logistics provider to the food and beverage industry, emphasizes that the Port of New York/New Jersey is one of his company’s primary port-centric locations. Last year the company signed a five-year lease with CenterPoint Properties for 240,000 square feet of ambient warehouse space in Bayonne, NJ. The space features 20-foot clear heights, 28 exterior dock doors and more than 10 acres of total property space. Overall, East Coast Warehouse


has grown its warehouse footprint by more than 25% during the last 18 months with most of the expansion being in and around the Port of New York/New Jersey. “Our facilities are port-centric


and provide ease of access in relation to container terminals,” Overley said. “As a public warehouse, we have flexibility in meeting the specific storage requirements of our customers offering variability in rack storage, floor stacking, along with space for co-packaging, labeling or other specific needs to our customers. We are able to meet the complex requirements of our customers via our TMS and WMS systems.” Overley emphasizes


that East Coast Warehouse & Distribution’s growth has been centered on the total logistics solution offering a combination of


trucking, warehousing and


distribution. “Having the scope and breadth of the service offering provides stability and flexibility in fluctuating markets and changing needs for our customers,” he says. “Most of our relationships are long term in general, and our focus is on partnerships built over a demonstrated longevity vs. a transactional relationship, which is ever-changing.” Like others, Overley space


finds that warehouse


availability is at an all-time low in key port markets driving rental rates to record levels. “The increase in cost and availability levels have been driven by e-commerce


distribution


expansion and facility construction lagging demand,” he said. Logistics operators in the cold


chain also find the markets for warehousing space tight, but some opportunities for expansion near seaports flourishing. Case in point: In July, MTC Logistics (MTC), along with officials from the Alabama State Port Authority, Alabama


Department of Commerce and elected officials, broke ground on MTC’s 12 million cubic feet international


temperature-


controlled distribution center. The new $61 million facility is located outside the gates of the Port of Mobile’s container terminal and has immediate highway access. “Mobile is a natural next step


for expanding our service offering into the Southeast,” said MTC Logistics President Andy Janson. MTC plans to be on the cutting


edge of innovation in areas of refrigeration, material handling, and IT systems while providing best in class customer service. Completion of the facility is


expected in 4th Quarter 2020. It will include services such as blast freezing, port drayage and LTL consolidation.


Amazon Fulfillment Center in Chester, VA. (Photo by Karen E. Thuermer)


conditioning is the most obvious amenity that could be offered workers. “Putting AC and heating in


these buildings comes at a big cost,” Egan says. “And depending on how the lease is written, the [utility bill] either goes go to the owner or the tenant.” But today more buildings are


MTC will


expand the seaport’s blast freeze capability by accommodating 30 truckloads per day and providing 40,000 racked pallet positions of storage. MTC was recruited by the Alabama State Port Authority to expand the blast freezing and refrigerated storage capability for Alabama and regional refrigerated cargo shippers of poultry and seafood.


MTC is


expected to more than quadruple available capacity for Alabama’s export poultry producers, as well as attract new shippers.


Human-centric issues


Top on the list of all site selection concerns, however,


is finding


and retaining employees in today’s low unemployment environment. Overley finds that the labor market has also become very competitive with generally strong demand for logistics personnel in warehousing and transportation, resulting from full employment and expanding e-commerce. Yet Tray Anderson, Logistics


& Industrial Lead – Americas, Cushman & Wakefield, remarks: “In my experience, companies that have put an emphasis on quality of life and a positive work culture have been able to effectively attract and retain employees, even when in direct competition with some of the largest industrial occupiers in the market.” Given the uncomfortable


temperatures in warehouse and DC facilities, heating and air


being built with comfort in mind. However, Egan adds: “Workers still go to work where the salaries are the highest. And, they also will go where they are more comfortable.”


Other amenities such as


basketball courts, lunch facilities, locker rooms, ping pong tables, or workout rooms are finding their way into DCs and add, say the experts, an extra $10,000 on the cost of a $125+ million project. While such amenities take a back seat to wages where hiring or job retention are concerned, they do help with employee moral. That was what Scott Ellis, general manager of the 350,000 square foot Navy Exchange Service Command (NEXCOM) DC in Suffolk, VA, found when a snack room operating on an honor system was added. “It’s made a world of a difference,” he said.


Truck Driver Redux


“We’re living the nightmare!” exclaims trucking firms and warehouse operators. Trucking is the lifeblood


of the supply chain, but right now the shortage of drivers is pegged at 51,000 and estimated to climb to 170,000 by 2026. Pay is contributing to the


crisis and is not on par with cost- of-living increases. ZipRecruiter estimates the average annual pay for long-haul drivers around $69,000, and says that few opportunities for pay increases or advancement exist -- even for those with several years of experience. Small fleet operators are


particularly finding it hard to hire drivers. “It’s hard to compete against carriers with large fleets,” says Robert Fay, president, Florida Freezer, which has 20 trucks. CDL testing standards, strict


drug and alcohol testing and safe and clean driving records are also entry barriers, although critical criteria. But the biggest deterrent is the long hours away from home. “It’s difficult to strike a work-


life balance,” states Keith Mowery, Vice President of Transportation/Logistics, United States Cold Storage. Plus where once being a truck driver was also a chance


for one to be his/her own boss, today regulations and technology dictate


when


drivers take breaks, routes, where to buy gas, and where to eat.


Compounding the


problem, American Trucking Associations’ (ATA) data indicates the average driver age is 50; 6% are women. Companies are encouraged to hire veterans, but vets are more interested in operating heavy equipment like forkliſts. “Besides, who wants a job


sitting in traffic all day with drivers cutting you off only to arrive at a warehouse and be told you are late -- then waiting in facilities that are not nice,” Mowery adds. Some firms now offer sign-on


bonuses. But if not structured correctly, these encourage drivers to jump ship for another company offering a sign-on bonus. “Fortunately, we have been able to grow our fleet of drivers by 30% in the last 18 months under difficult market conditions,” reveals Jamie Overley, CEO, East Coast Warehouse & Distribution. “We offer our drivers and business partners options for a career path via local or regional opportunities.”


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