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The Advantages of "Inland Ports" in Today's Global Economy

Don Little, Senior Vice President, Northern California – Opus West Corporation (Dec/Jan 08)
It's no secret that in today's global economy, the United States has become a major buyer of manufactured goods from around the globe. Consequently, our domestic manufacturing base is declining and imports are increasing. Perhaps surprisingly, even with this shift, industrial real estate demand continues to expand at a rate of 6 to 10 percent annually. This expansion is being driven by the real estate needs of importing companies, which must find strategic locations that can support the many functions of the new distribution patterns required for foreign-made goods.

As a result, our country's major ports are facing tremendous congestion as the inbound volume of goods manufactured abroad continues to escalate. Projections for the next five to six years indicate that some ports will triple their containership capacity and freight throughput. To accommodate the rise in global imports, the industry is shifting more to an "inland port" model, where inbound goods are quickly off-loaded from ships and moved to inland distribution centers for subsequent handling and redistribution within the country. The advantages are numerous.

Ideal inland ports are in close proximity to a "traditional" port and have efficient access to logistics services, transportation systems, and consumer markets. Furthermore, the best locations also support large flexible buildings and have extensive parking for containers and trailers, as well as easy access to mature transportation infrastructures.

Also important are the benefits available through the Foreign-Trade Zone (FTZ) program. Distribution center sites that have FTZ program benefits offer significant advantages over non-FTZ sites. For example, in an FTZ, the importer (or the importer's logistics provider) may consolidate the U.S. Customs and Border Protection entries into a single weekly filing. This change alone has the potential to save large tenants hundreds of thousands of dollars annually. Furthermore, inland ports are, by definition, located in "second-tier" nonurban markets; thus, overall labor and property costs are traditionally lower.

For example, Opus is banking on the success of the inland port model as well as the increased demand for efficient domestic goods movements through our recent acquisition of 474 acres of land in Stockton, California, for the future home of Opus Logistics Center-Stockton (OLC). Slated for completion in the next five to seven years, OLC will be an 8.2 million-square-foot industrial campus serving as a global logistics supply center and distribution hub for importing and exporting a variety of products. Current plans include 13 buildings, many of them encompassing more than one million square feet. The project is strategically positioned to link major port operations in northern and southern California, as it is adjacent to rail intermodal terminals and directly connected to the state's major highways.

When selecting a distribution center site, consider taking advantage of the many benefits offered by the inland port model and multimodal domestic freight connections. Inland ports offer superior logistics, the availability of large buildings, close proximity to rail and highways, ample truck parking, less traffic congestion, and economic incentives. In today's new global economy, speed to market with finished goods and lowest cost shipping are the drivers more than ever.

Don Little is a senior vice president for Opus West Corporation in northern California and oversees the region's real estate development activities.

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