Twenty years after BNSF Railway opened its first logistics park in Fort Worth, Texas, the railroad this year will open its fourth, a sprawling 433-acre intermodal terminal with up to 7 million square feet of adjacent industrial real estate capacity about 550 miles to the north.
For BNSF, it means building on the success of its logistics parks in Fort Worth, Chicago and Memphis, where the railroad has increased intermodal volume by attracting major shippers. Intermodal traffic, for example, is up about 10 percent year-to-date at the BNSF terminal at AllianceTexas, reflecting not only the area’s economic growth but also the logistics advantages major shippers gain at the 9,600-acre business park.
Tenants at AllianceTexas include J.C. Penney, Kraft, Michaels Stores, Nestlé and SC Johnson.
“The logistics park is a catalyst for the logistics cluster,” said Frederick Malesa, BNSF’s vice president of international intermodal. “From the logistics park comes the cluster of distribution centers, and that in turn drives regional economies and creates jobs.”
Logistics clusters are far from new, even if they don’t attract the same attention as high-tech and entertainment clusters, such as Silicon Valley and Hollywood, respectively, said Yossi Sheffi, a professor at the Massachusetts Institute of Technology and director of the school’s Center for Transportation and Logistics.
The growth of intermodal traffic, the efficiencies gained by having a logistics labor pool, educational opportunities and potential collaboration between neighboring companies all are driving creation of logistics clusters.
Sheffi defines a logistics campus as a development run by one company, such as UPS’s footprint in Louisville, Ky. Logistics parks — run by a developer or a port authority — are open to third-party logistics providers, transportation companies and shippers, whereas logistics clusters are less defined and aren’t managed by a singly entity, said Sheffi, author of the 2012 book “Logistics Clusters: Delivering Value and Driving Growth.”
“We are using the intermodal hub as the anchor for the (distribution centers) and warehouse space around it,” said Katie Farmer, BNSF’s group vice president of consumer products. “It gives us the opportunity to participate in a bigger way from an intermodal perspective with customers by having them located adjacent to that intermodal hub.”
The newest BNSF intermodal terminal in Edgerton, Kan., about 30 miles southwest of Kansas City and adjacent to Interstate 35 and State Highway 56, will have five wide-span electric cranes, giving it an annual lift capacity of 500,000 units. Kansas City is second only to Chicago nationally in terms of the number of freight trains passing through and tops the nation when it comes to freight tonnage traffic. The terminal has the ability to expand to 1.5 million annual lifts.
NorthPoint Development, the Kansas City-based developer of the logistics park’s industrial real estate component, already has attracted two shippers: Demdaco, a home décor and gift retailer, and DeLong, a grain exporter. NorthPoint also has broken ground on a 500,000-square-foot warehouse for speculative use.
Demdaco is moving into a 327,000-square-foot facility at the park, largely because staying at its current distribution center near BNSF’s existing intermodal terminal in Kansas City would increase the shipper’s drayage costs, said Steve Fowler, chief operations officer of the Kansas City-based company. The new, more automated facility will help Demdaco more efficiently pick and pack Asian imports coming through the Port of Long Beach, he said. Fowler said the company plans to work with fellow tenant DeLong to save on shipping costs through match-backing, the matching of inbound containers with export shipments.
DeLong’s nine-acre facility will have storage capacity of 250 containers, and its silos will be able to hold about 300 containers’ worth of grain and feedstuffs, adding equipment repositioning flexibility to the exporter’s transloading facilities in Chicago; Newark, N.J.; Savannah; and Omaha.
When the facility opens in September, the company will have capacity to load up to 300 containers daily, and it plans to sell any unused capacity to fellow tenants, according to Bo DeLong, vice president of grain operations. BNSF has worked with DeLong as part of the railroad’s match-back program, which identifies opportunities, as import volumes outpace export traffic by nearly 2-to-1.
The need for containers in Kansas City appears to be growing. For the first time since mid-April, there were no 20-foot containers available for export in the area in the week of July 24, according to the U.S. Department of Agriculture’s weekly Ocean Shipping Container Availability Report. Although availability has fallen since the end of June, the USDA expects more 20-foot containers to be available in the coming weeks.
Logistics parks aren’t a guaranteed success, said Ted Prince, a principal of T. Prince & Associates and a Journal of Commerce columnist. But even if the industrial real estate component of the Kansas City logistics park flounders, the BNSF terminal likely still will pay off, because the railroad needs more capacity than its existing intermodal terminal in Argentine, Kan., can provide.
Interestingly, some logistics park successes, such as AllianceTexas, owe much of their fortune to happenstance, Prince said. Hillwood Properties, for example, originally planned AllianceTexas as aviation-focused, only to realize later that intermodal rail would be the major driver of growth.
[Ed. - This article supersedes an earlier version published on July 30.]