As logistics companies continue to rely more on rail for shipping, commercial real estate companies stand poised to gain from the expanding intermodal industry in Will County, the epicenter of this explosive growth.
John Grueling, president and CEO of Will County Center for Economic Development, began his job 10 years ago. At about the exact same time, CenterPoint Properties started moving dirt on the first of its two major intermodal projects in Will County. What has transpired since has been nothing short of astonishing.
Increasing fuel costs have made it more economical to ship in bulk across the county via rail. The Chicago area, Will County in particular, is well situated to act as a hub for this cross-country traffic. Capitalizing on this, firms such as CenterPoint have develop inland ports, known as intermodals, where rail product can be unloaded, stored and shipped to regional consumers via truck.
In 2011, CenterPoint Intermodal Centers house the BNSF Logistics Park-Chicago, a 770-acre facility in Elwood, and Union Pacific-Joliet Intermodal Terminal, a 835-acre facility in Joliet. The actual intermodal terminals are only a portion of the overall sites. Together, the sprawling developments encompass 6,100 acres and are capable of supporting up to 32 million square feet of commercial real estate space.
Grueling says that the projects have generated 10,000-12,000 jobs since they began. And, most importantly, they have brought an unprecedented level of private investment to the area in a time when most communities are struggling for investment dollars.
“The number one thing that these developments have done for us is attract private capital,” says Grueling. “In a time when many communities are not attracting private capital, we have seen $2 billion in investments during this process.”
Grueling says that taxes from the real estate investments have greatly benefited community developments such as schools, libraries, and community buildings.
While the growth has been amazing, it has not come without its issues. Mainly, when private growth takes off at such speeds, it is often difficult for community infrastructure to keep up. Currently, Will County is in talks to establish a special transportation district that would establish uniform traffic and weight restrictions for the thousands of trucks that pass through the area on a daily basis.
Grueling is also relying on federal support to dramatically improve road infrastructure, such as widening I-80 and constructing a proposed toll road known as the Illiana Expressway, a 56-mile stretch of highway that would connect I-55 in Illinois with I-65 in Indiana. These projects may be years from completion and take considerable political energy to pull off, but as the operations expand they seem to become more necessary to relieve the congestion that is building up.
“I kind of feel like the guy who is spinning multiple plates,” says Grueling,” but so far, so good.”
If the process continues as CRE firms hope, Grueling’s staff will have even more plates to balance in the future.
Even in a down economy, CenterPoint has been very successful lately with its Intermodal projects.
According to Eric Gilbert, senior vice president of development for CenterPoint, the firm has completed seven deals at its Intermodal developments at Elwood and Joliet in the last 18 months. Some of the recent deals include a 657,000-square-foot lease with Home Depot, a 43-acre build to suit for sale for APL, an 18-acre build to suit for lease for Mediterranean Shipping, and a 12-acre build to suit for lease for DeLong Companies.
The firm still has a way to go to meet its goal of 20 million square feet of industrial space at its Joliet facility, but it could receive a future boost from an expansion of the intermodal operations.
CenterPoint has zoned 300 acres for future intermodal uses, a move that could potentially allow the firm to expand to two terminals at Joliet.
“It is something that we market and we think long-term will make sense for the right railroad,” says Gilbert. “It is safe to say that it is unlikely to happen anytime this year. We see it as a viable option in the next several years. There is great interest.”
With five of the six class one railroads operating in Will County, the new terminal could be an expansion for Union Pacific or BNSF, or, it could bring a entirely new line to the yards.
CenterPoint also has its sights set on a property in Crete, a small town 35 miles south of Chicago, where it owns 1,000 acres and plans to establish another intermodal center. Currently, the firm is working through the utility easement process.
Will County’s Gruelling says that the Crete development could be a connection to an East Coast railway as the CSX railway runs through the development. UP also has access to a potential yard in Crete with its present lines.
However, future development may not stop with CenterPoint’s plans.
Ridge Property Trust, a privately-held REIT based in Rosemont, has begun work on its 1,500-acre planned park in Wilmington, just three miles south of the intermodal yard in Elwood.
The firm has hired Krusinski Construction to complete infrastructure work and recently it named Jones Lang LaSalle as the exclusive marketing agent for what will be known as Ridgeport Logistics Center.
James Martell, chairman and CEO of Ridge, says that the park will be able to support 14 million square feet of commercial space. The firm has just begun marketing efforts and is still completing infrastructure work, but depending on the market’s acceptance of the project, the firm could conceivably deliver 5-6 million square feet in 2012.
“There is an appetite for the project right now,” says Martell.
Martell says that his firm has been accumulating the land for several years and struck a deal with BNSF to be the park’s rail provider. Moving forward, he says that the park will target food industry users and firms that specialize in liquid products. The park will have pipelines for mixing materials on site.
One of the strongest selling points of the park is its ease of access to I-55, says Martell.
Ridgeport is located on a four-way interchange at Lorenzo Road. Trucks will be able to be on the interstate within a matter of minutes and some buildings will have signage opportunities along I-55.
“It will be easy to get in and out of our park and it will be great if you want identity and exposure,” says Martell.
Regardless, as high fuel costs are predicted to be the norm for the foreseeable future, transportation firms will equate a location next to a rail yard as a financially sound move.
“The key is the drayage cost,” says Martell. “With the cost of gasoline and diesel so high, rails have an advantage. Chicago has a real advantage.”