BIG PICTURE: New Distribution Centers Aim for Key Highway Sites

ORLANDO-Higher fuel prices in some sectors and the need to deliver merchandise to consumers ahead of the competition is driving a new wave of facilities development that is aiming exclusively for key highway-connection sites, brokers, developers and owners tell GlobeSt.com.

High-tech warehouses at or near a market’s best surface transportation routes have always been in demand, but now more so than ever as the national energy crunch is increasing shipping expenses in some areas, industry sources say.

“As companies continue their trend of requiring locations as close to major arteries as possible, projects at those locations are going to dominate over projects that are located in the periphery without immediate access to major arteries, particularly for large statewide or regional distribution companies,” David Murphy, an industrial specialist in the Orlando office of CB Richard Ellis Inc., tells GlobeSt.com.

In Orlando, for example, Duke-Weeks Realty Corp. of Indianapolis, IN and CalEAst, a California-based developer, already have spotted the new niche, Murphy says.

“Duke Realty has been successful in developing in Orlando Central Park South and CalEAst recently developed several bulk and flex buildings in one of the remaining tracts in this submarket in Cypress park,” the broker says.

Large distribution users are willing to pay more per square foot for industrial space in parks with the best access to transportation linkages, Murphy tells GlobeSt.com.

Like Murphy, George D. Livingston, founder and chairman of Maitland, FL-based Realvest Partners Inc., finds higher fuel costs, either now or in the near future, will affect distribution systems by increasing the cost of shipping in most metro markets.

The current scenario of manufacturers and distributors anxious to lower their shipping costs “opens the door to significant opportunities for astute developers who can locate sites convenient to major transportation routes,” Livingston tells GlobeSt.com.

In Chicago, CenterPoint Properties Trust spotted the niche some time ago and continues to grow distribution space at O’Hare International Airport. CenterPoint owns 10 buildings totaling 1.8 million sf on O’Hare property and has another 2.5 million sf of just-off-airport facilities.

But that’s still not enough, CenterPoint officials tell GlobeSt.com Midwest Bureau Chief Mark Ruda. The company has a new long-term lease on 49 acres on the northern end of O’Hare where it plans to develop another 800,000 sf of air freight space over the next three years.

On the Northwest coast, developers, too, are aware of the need for better-located distribution centers to cope with increased shipping expenses.

Southshore Corporate Park, a 230-acre venture being developed by San Francisco-based Catellus Development Corp. near Interstate 84 and the Portland, OR International Airport, has built out 850,000 sf of fully occupied space since acquiring the asset in July 1998.

Catellus officials tell GlobeSt.com West Coast Bureau Chief Brian Miller the company plans to break ground shortly on another 183,000 sf of spec product at the same location.

Another developer, Panattoni Development Corp. of Sacramento, CA, is buying up well-located dirt around Portland and plans a 60-acre spec industrial project adjacent to Southshore Corporate Park and a 50-acre undertaking near Interstate 5. Each park will house at least 600,000 sf of distribution or warehouse product, Miller reports.

In the Dallas-Fort Worth hub, developers are scouting freeway access more than rail lines for suitable distribution center locations, Jon Napper, a Texas partner in Panattoni Development Corp., tells GlobeSt.com Southwest Bureau Chief Connie Gore.

But rising fuel prices aren’t the reason for new distribution sites surfacing near major road arteries in Texas, Napper says. Consolidations by major distributors are the driving force.

Unlike other parts of the nation, the developer tells Gore, “I’ve not seen anyone make a distribution decision based on fuel pricing.”