NAIOP New Jersey Panel: Transportation Infrastructure Drives Economic Growth

Costs, Capital Projects, evolving Technology and remaining competitive are Key. End Quote

Middlesex-Somerset-Hunterdon, NJ (1888PressRelease) December 14, 2013 - The NAIOP New Jersey event was titled "Life After the Super Bowl: Transportation & Logistics Update," and the implication was that while the upcoming Super Bowl will tax the region's infrastructure, long-term remedies are needed for the region to remain competitive. Public and private sector leaders agreed that the transportation infrastructure drives economic growth, and while the region's infrastructure, particularly port/rail, is "outstanding," continued investment is crucial even as public sector bodies deal with financial strictures.

"The real problem, for capital projects, is that we face unprecedented cash shortages," David Samson, chairman of the Port Authority of New York/New Jersey, told attendees at the NYSA Training Center in Port Elizabeth. The response? "Increased operating efficiency, toll and fare increases, and P3s," he said, the latter a reference to public-private partnerships.

The end result for the Port Authority is an "aggressive capital investment program," said Samson, a program that includes rebuilding the World Trade Center site, including the news that Westfield Group had just paid the Port Authority a half-billion-dollars to acquire the remaining stake of the site's retail package. It's also an example of the Authority's increasing reliance on P3s.

In terms of gross expenditures, the Port Authority spent $3.3 billion in 2012 alone for capital projects. Among them: Port dredging, modernization of the port's container terminals, intermodal upgrades, raising the Bayonne Bridge to admit the next-generation Panamax vessels, improvements to several other of the region's aging bridges and more.

Samson also announced that a Port Performance Task Force had been formed because, "we all must work together to remain competitive. Productivity of the port is key on the very competitive East Coast, and we need to address systemic problems. Ultimately, we are driving economic growth through investment in transportation. The transportation infrastructure is a means, not an end."

Similarly addressing the question of finances, "the 'small stuff' really matters when it comes to costs," said Commissioner James Simpson of the New Jersey DOT, noting various programs and operational savings as part of an effort that "has saved hundreds of millions of dollars." That effort was impacted, of course, by superstorm Sandy, which he termed a "transportation Armageddon."

The bottom line for DOT, Simpson said, is "getting back to basics," focusing on such issues as highway construction projects, specifically on projects that "make sense" as opposed to those that are "politically driven"; reducing the number of functionally obsolete bridges statewide; and utilizing such technology as adaptive signalization to improve traffic flow with an overall goal of "travel time savings." And the overriding mantra of DOT's efforts is "safety first."

One key DOT effort is reconstruction of the Pulaski Skyway, a five-year, $1.2 billion project that "will have a big impact on the region," Simpson said.

The program also featured a panel that focused on the specifics of logistics and warehouse/distribution trends. Anne Strauss-Wieder, president of A. Strauss-Wieder, Inc., reported that New Jersey has seen a rapid increase in facilities, especially in the 500,000-square-foot range, and shifts in what the buildings are used for. Those changes are a response to consumer changes - notably Internet shopping - in the nation's most-densely populated area.

Other logistics trends Strauss-Wieder noted include more import product coming through East Coast ports, including products destined for Mid-America, instead of coming overland from West Coast ports; free consumer-product shipping, "which has a major impact on shipping volume"; a critical truck driver shortage; increased restrictions, including hours of service rules; and such cost considerations as labor, new trucks and tolls.

For trucking in particular, "we are seeing an effort to reduce empty movements, consideration of alternative fuels, enhanced security measures, and the emergence of new technologies, such as geo fencing," she said.

In terms of rail, trends include growth in intermodal and double-stacking - "very cost-effective from a labor standpoint," said William Goetz, vice president of CSX Transportation. There is also continued growth in general merchandise shipments.

Goetz termed the region's port/rail infrastructure "outstanding - it's the envy of other East Coast ports and a real competitive advantage."

In a note of caution tied to real estate, specifically properties that are advertised as having rail service, "it is really important to understand the dynamics of rail," Goetz explained. That all relates to whether "rail service" means freight or passenger, or both, as well as weight and capacity, and whether "rail service" is adequate for a specific user. He termed it a "buyer beware" situation.

And the distribution center itself is changing, noted Bob Silverman, executive vice president of Jones Lang LaSalle. Specific trends for 2014 and beyond include everything from clear heights of 32 feet and up, with 36 feet preferred; multi-channel and omni-channel distribution; next day and same day service; extended supply chains; and a focus on energy costs and sustainability. He termed the latter "a bigger issue going forward.

"Facility designs are out of date," Silverman said, but that's changing to meet the new demands, including increasing Internet sales and the resulting multi-channel and omni-channel nature of distribution. Responses include everything from low shrink floors to lower trailers "with more cube, which puts pressure on dock design."

Noting that transportation is the largest cost factor in logistics, "incentives, especially tax breaks, are driving a lot of deals, and New Jersey has among the best programs," Silverman said. Other locational trends include more brownfields than greenfields, "because brownfields are closer to population centers, and that factors into transportation costs.

"Distributors want to be near customers, ports, intermodal and labor, and they want more trailer parking and car/truck separation," he concluded.

"Transportation is the lifeblood of the region's economy," said Michael G. McGuinness, chief executive officer of NAIOP New Jersey, the commercial real estate development association. "The health of our ports and the logistics industry depends on the free-flowing movement of goods to consumers.

"The increasing demand for consumer goods and its impact on the logistics supply chain, demand for new industrial development and future industrial trends are among the topics to be explored at the only national conference for the industrial sector - I.con on June 5 and 6, 2014 at the Hyatt Regency Jersey City," said McGuinness, noting that NAIOP NJ and NAIOP Corporate will co-host the event, which draws attendance from across North America.

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