From Site Selection magazine, September 2009

Colossus of Roads
This new interchange near Thessaloniki is one of nearly 60 new interchanges along the 416-mile (670-km.) Egnatia Motorway in Greece.
Highway, byway and railway projects around the world seek to put people and products in motion.
ogistics and distribution locations are only as good as the lines on the map that connect them. Thus do transportation infrastructure and the destination points it links continue their perpetual dance of development.
      Europe has been rich with supersized infrastructure projects over the past decade, with spectacular bridges, highways and tunnels taking shape to help speed cargo and citizens alike. That trend continues as major new investments stretching from Great Britain to Greece are at various stages of development.
      One of the world's major infrastructure achievements is nearing completion in Greece. By any standard, the Egnatia Motorway, is one of the world's great
infrastructure accomplishments. Greek Prime Minister Kostas Karamanlis opened the final section of the highway in May 2009. Construction began in the 1990s. The €6.7-billion (US$9.5-billion) project stretches 670 km. (416 miles) from the port city of Igoumenitsa on Greece's western border to the city of Kipi on Greece's eastern border with Turkey. The European Union, the Greek Government and the European Investment Bank have financed the project.
      The Egnatia Motorway features 1,650 major bridges and 76 tunnels along its route as it passes through 330 towns and villages. Approximately half the project's cost was spent on bridges and tunnels. The route also includes 43 river crossings and 11 railway crossings.
      Egnatia approximately traces a major trade route of the ancient world, the Via Egnatia, built in 130 B.C. The original highway was one of the major links to Rome. Greek officials believe the route will regain its regional significance in trade, investment and commerce. It provides an improved link with the Greek metropolitan area of Thessaloniki. On a European level, Egnatia will link the major industrial centers of the West with the East.
      The Greek government anticipates the roadway will open many new investment opportunities in areas such as logistics, manufacturing and tourism. Egnatia is a collector route for the Balkan and southeast Europeean transport system, and several regional European transportation corridors connect to the highway. Egnatia directly links Greece with Albania, Macedonia, Bulgaria and Turkey through nine vertical connections.

Link for Northern Europe
      In September 2008, Denmark and Germany signed a treaty for the construction of a fixed link across the Fehmarnbelt. The project will connect the German island of Fehmarn to the Danish island of Lolland with a bridge crossing the 19-km. (11-mile) Fehmarn Belt in the Baltic Sea. Officials of the two nations say the link will close the gap in the infrastructure between Scandinavia and the European continent and will greatly improve traffic conditions in the region. The link is projected to result in lower transport costs for train and car traffic while improving business competitiveness.
The proposed Fehmarnbelt link will be an important conduit between Denmark and Germany.

      The current preferred link is a cable-stayed bridge, but an immersed tunnel is also being considered. Engineering firms are now looking at both options. The current timetable calls for the type of link to be determined by 2012 and construction to be completed by 2018. It will include a double-track railway and four-lane highway. The estimated cost for the bridge alone is €4.4 billion (US$6.2 billion). If the 20-km. (12.4-mile) tunnel option is selected, it will be the longest of its type in the world.
      While the link is a joint project between Denmark and Germany, Denmark has assumed all responsibility for its implementation. The cost will be financed through user payment and EU subsidies. The treaty between Denmark and Germany stipulates that the link is a Danish-owned project, designating that Denmark will plan, construct, operate and finance the coast-coast link. The two countries will each be responsible for developing their own traffic facilities on land as part of the project.

London's Crossrail
      Initial construction began in May 2009 on Crossrail, the largest civil engineering project in Europe.
The Canary Wharf Station will be among the first projects along London's massive Crossrail.
The Canary Wharf Station will be among the first projects along London's massive Crossrail.
The $26.2-billion project will add a 118.5-km. (74-mile) railway that will connect Heathrow Airport and regions west of London to commuter areas east of the city. Crossrail will include up to 42 km. (26 miles) of tunnels bored beneath London streets. Crossrail is due to begin operation in 2017.
      The U.K. projects that Crossrail will create about 14,000 jobs at the height of its construction and up to 30,000 jobs supporting the project by 2026. Estimates are that it will increase London's public transport network by 10 percent, put 1.5 million people within an hour of London's business centers and add at least $33.1 billion to the U.K. economy.
      "Crossrail will not only mean faster journey times across the capital and beyond, it will also bring a massive economic boost to the city, creating thousands of jobs and adding at least £20 billion to our economy," said U.K. Prime Minister Gordon Brown during a ceremony in May 2009 marking the beginning of construction. "Investment into important projects like Crossrail, the largest construction project in Europe, is vital to create and protect jobs as well as supporting businesses, so that we can grow our way out of recession and ensure a strong future for London and the country as a whole."
      More than 200 million passengers are expected to use the railway in its first year of operation. The new railway will be designed to initially accommodate 10-carriage trains with provision for longer trains in the future. Crossrail will provide new transport links with the Tube, Thameslink, National Rail, DLR and London Overground. It is anticipated that more than 200 million passengers will use Crossrail in the first year of operation.

Baby Steps
      Passenger rail is on the front burner on the North American side of the pond too.
The Metsovitikos Bridge connects two tunnels along the Egnatia Motorway.
The Metsovitikos Bridge connects two tunnels along the Egnatia Motorway.
But before U.S. rail passengers reach high speed, the freight their employers move may need to simply get up to speed.
      In April 2009, the Obama Administration announced the availability of $8 billion in federal stimulus funds for high-speed rail projects, with the expectation of choosing recipients by late September. Another $2 billion may come from a proposed "infrastructure bank" that received House approval in late July, and President Obama has declared his desire for an additional $1 billion a year over the next five years to support high-speed rail.
      For just the stimulus tranche of cash, by mid-July the administration had received 272 applications totaling $102 billion in requested funds. Many come from high-speed rail corridor alliances that have been seeking this kind of support for well over a decade. Congress originally authorized a program of national high speed rail corridors in 1991.
      "The time has finally come for the United States to get serious about building a national network of high-speed rail corridors we can all be proud of," U.S. Transportation Secretary Ray LaHood said in June. "High-speed rail can reduce traffic congestion and link up with light rail, subways and buses to make travel more convenient and our communities more livable." 
      Those who follow the nation's infrastructure challenges are familiar by now with the notion that it takes approximately US$1 million per mile to install electrical transmission infrastructure. To upgrade existing railroad lines to meet the needs of high-speed passenger rail would cost approximately twice that, according to a 2004 report from the Midwest Regional Rail Initiative.
Randal O'Toole, Cato Institute Senior Fellow
Randal O'Toole, Cato Institute Senior Fellow
Randal O'Toole, a Cato Institute Senior Fellow working on urban growth, public land, and transportation issues, says as a result of price hikes for steel, concrete and energy, it is likely that even those projected costs "need to be adjusted upwards by 50 percent or more."
      But more costly than the price tag may be congestive freight failure. For economic developers, then, the key question may be this: Given the country's already backlogged and congested freight rail network, is it possible that, counter-intuitively, the regions that end up receiving some of that $8 billion for their high-speed corridors might actually be hurting themselves when it comes to future industrial development along rail networks in their regions?
      "That is indeed a serious problem," writes O'Toole by e-mail. "Both Japan and Europe have decided to dedicate their rail systems to passenger. Even though Europe has made a big effort to get freight off the roads and onto the rails, it has largely been a failure."
      "Do I think it could end up frustrating existing, dilapidated networks? Absolutely," says Foster Finley, managing director in charge of the logistics practice for Southfield, Mich.-based consulting firm AlixPartners, in what he says is simply conjecture. "The normal thing people will find is that planning, efficiency and execution typically get diverted a bit along the way," which often means projects coming in late and over budget. "I'm not sure the average person is ready to embrace the high fixed cost of a high-speed rail system. I'm afraid it's the wrong focus at the wrong time, with a very substantial fixed cost."
      In 2004, says O'Toole, Europe only moved 17 percent of its freight by rail; the U.S. moved 38 percent – a proportion which has grown to 40 percent since then. And the Class I railroads would love to see 10 percent more by 2020.
      In arguing for a national freight policy before Congress this summer, BNSF CEO Matt Rose suggested a multi-pronged approach that would include tax incentives to spur infrastructure investments, increased use of public-private partnerships, and performance-based transportation funds. To increase freight rail market share by 10 percent, he said, would require an additional $700 million in annual investment.
      "High-speed trains are a serious competitor with freight for rail capacity," says O'Toole. "Obama's plan calls for running passenger trains on freight lines at 110 mph. Matt Rose of BNSF testified before Congress last April that passenger trains running faster than 90 mph were not compatible with freight.
      "High-speed rail will mainly serve downtown areas, so only businesses that require downtown-to-downtown travel will realistically benefit from locating near a high-speed rail station," writes O'Toole. "There will be some cachet in being near a station – as would be true of any heavily subsidized megaproject – but the actual use of those trains will be much more limited than people might think (especially considering that the average speed of most of the trains will only be about 60-70 mph)."

Common Ground
      But even the Class Is themselves would not necessarily paint things with so dire a palette.
0909 Historical Marker

      "Ultimately even freight railroads agree that moving people faster is good," says Association of American Railroads (AAR) spokesperson Holly Arthur. "We support the concept. It just needs to be done in the right way."
      In June 2009, the Federal Railroad Administration, much to the AAR's delight, issued guidance on applying for the stimulus funding that made it clear that governments will need to have written contracts in place with the private freight railroads hosting their projects. A year earlier, however, a Union Pacific official asked California authorities to not plan on using its lines for high-speed passenger rail.
      Asked if BNSF has made any similar requests, D.J. Mitchell, assistant vice president of passenger operations for BNSF, says, "Absolutely, positively not. We're working with Caltrans and the high-speed rail authority. We simply do not have that philosophy or that instruction from our executive team."
      Asked whether high-speed passenger rail might put a dent in industrial development along the freight lines, Mitchell again says, "Absolutely not, on our property. We have a principle that any arrangement we make with a public agency will not degrade the quality of freight service now or in the future."
      Mitchell says that principle applies to any proposed commuter rail service addition, such as those he's overseen in Chicago (where he used to run a commuter line) and Los Angeles.
      "We model and measure performance change as we add passenger service, and the obligation is to go back to current conditions," he says. "If the average [pre-passenger] transit time is 10 hours, we have to make sure it gets back to that."
      Mitchell points to Seattle as a market where a successful marriage of the two needs has occurred, with the twin markers of increased passenger rail stations and increased light industrial development in the same neighborhoods.
THE LAY OF THE LAND: The map above overlays high-speed rail corridors, recent demographic projections and the current rail network to give a complete picture of the potential landscape down the line. Factoring in recent facility project location results from the Conway Data New Plant Database would indicate that Texas, Florida, the Southeast and the Greater Chicago region might have a leg up on the competition for federal funds due to be awarded in September. But there's more to the picture: The criteria released in July include favored status for projects with established revenue sources (e.g. bonds in California) and multistate cooperation, as well as those that would reduce highway and airport congestion and create the greatest number of quality jobs.

Sense of Perspective

      Ultimately, says Mitchell, when freight and passenger priorities conflict, whether it's high-speed or not, it's time to add another line.
      "The working carrying capability of a two-track railroad is about 80 trains a day. For a three-track, north of 150 trains a day. But you have to worry about the operating pattern. If the commuter people want inbound and outbound service during rush hour, they're taking the asset – that's the point when we need a third track. L.A. is adding a third track by 2012 or 2013. Seattle is in that process."
      In fact, four or five tracks are not out of the question for some areas, says Mitchell, provided there is the property and the money. Mitchell leavens ballooning cost projections with an engineer's eye, noting that most first-blush estimates are based on unit cost estimates that vary by locality.
      "Right now the cost in L.A. as we're triple-tracking is bumping up to $10 million a mile," he says. "In the open area [outside the city] it's closer to $3 million or $4 million a mile. For any one of these high-speed rail corridors, it will be different."
      One thing Mitchell does know, however, is that passenger rail in the long run beats building another expressway lane. He says to add the level of highway service that would equate to 1,500 people per train on five trains an hour would cost "north of $60 million a mile."
      Mitchell says it's all about "creating another right of way to carry boxes a little bigger than the boxes people ride in on something called a 'street.' The mission of rail service is to get more people in boxes to move the same distance."
      In fact, in Ohio, a revised financing plan for the state's passenger rail infrastructure upgrade includes a potential $10 million from fees paid by establishments to appear on blue highway upcoming exit signs.
      As the nation's various high-speed rail corridor supporters would attest, it's all about perseverance and long-term courage.
      "We started working on the Seattle project in 1991," says Mitchell, "and this year we finished construction on the south leg of that service. There's no longer a debate, because they were able to make good policy decisions based on the position we took early on in 1992."
      For those who point to France's TGV network, Mitchell calls attention to the system's 50 years of evolution, and the fact that really fast trains did not come up until capacity between Paris and Lyon had been filled to the breaking point and a new line had to be considered.
      "They didn't get there overnight," he says. "They built the market, and the reliability. At the point of TGV, there was a significant mode shift from air to rail. Now I don't think you can fly between Paris and Lyon, and I know you can't fly between Paris and Brussels.
      "It's a lifetime effort," he says. "In the United States we are just now starting, and we've been working in the trenches on this subject for literally 20 years."

What the Logistics Numbers Say
      As for the cargo side of the equation, facility projects with a distribution/logistics component tracked by the Conway Data New Plant Database between Jan. 2008 and mid-July 2009 numbered 1,255. After the U.S., which was the far-and-away leader with 965 projects, among the leaders by nation were, in order:
Canada 50
Mexico 32
United Kingdom 23
Hungary 21
Germany 21

      Leading non-U.S. metro areas for new logistics activity include Calgary, Budapest, Dubai and Guadalajara, followed by Shanghai, Toronto and Mexico City. Logistics momentum in Mexico is heating up: Witness Wal-Mart de Mexico's July 2009 announcement of its third distribution center in the state of Tabasco and 14th in Mexico. The $54.1-million facility will employ 700 on a spread approaching 2 million sq. ft. (185,800 sq. m.) that will serve seven Mexican states in the nation's southeast region.
      As shippers and territories alike create new services and routes to take advantage of the Mexican connection to Asia, some analysts continue to look favorably on the country's logistics prospects. Early 2009 saw the release of the "Global Contract Logistics 2009" report by U.K.-based Transport Intelligence. "Mexico is set to benefit from two major trends," said Transport Intelligence CEO John Manners-Bell of the report's findings. "Investment in port facilities will divert Asia Pacific shipping volumes from the major U.S. West Coast ports. The country's logistics industry will also develop on the back of 'near-sourcing' of production which, with rising input costs in China, will become increasingly important. For the full benefits of this to be seen by the American consumer, the authorities need to sort out the cross-border trucking impasse which is engraining inefficiency in the system."

Texas is Tops
      Within the U.S., these are the top 10 states continuing to see logistics location or expansion momentum, listed in order of project totals tracked during that same Jan. 2008-July 2009 time period:
Texas 141
Ohio 118
Illinois 68
North Carolina 56
Pennsylvania 48
Virginia 41
Florida 40
Indiana 39
California 38
New York 36

      Those states are being chased by the next tier: Georgia (31), Michigan (31), Kentucky (29), Tennessee (25) and Wisconsin (18).
      Among U.S. metro areas (core-based statistical areas, or CBSAs) examined for that same time period, here are the logistics leaders:
Dallas-Fort Worth-Arlington, Texas 59
Chicago-Naperville-Joliet, Ill.-Ind.-Wis. 57
Houston-Baytown-Sugar Land, Texas 43
Cincinnati-Middletown, Ohio-Ky.-Ind. 35
Indianapolis, Ind. 21
Columbus, Ohio 21
New York-Newark-Edison, N.Y.-N.J.-Pa. 18
Cleveland-Elyria-Mentor, Ohio 15
Riverside-San Bernardino-Ontario, Calif. 14
Detroit-Warren-Livonia, Mich. 14

      All but Indianapolis and Riverside were among Site Selection's Top 10 Metro areas for overall corporate facility projects in 2008, according to New Plant data.
      Approximately a dozen communities hover just outside the logistics top 10, including Pittsburgh, Pa., Richmond, Va.; and Atlanta-Sandy Springs, Ga., with 13 projects each; Charlotte-Gastonia-Concord, N.C.-S.C., and Virginia Beach-Norfolk-Newport News, Va., with 12 each; and the multi-state river metros of St. Louis, Louisville and Memphis with 11 each.
      Tennessee, Ohio and Kentucky lead the way in micropolitan logistics, with projects locating in smaller communities such as Ripley, Tenn.; Holiday City, Ohio; and Springfield, Ky.
      Following the overall consolidation trend, 114 of the U.S. projects (nearly 12 percent) featured manufacturing and distribution functions, 40 included headquarters or office space mixed with logistics space, and 37 contained some mix of office, logistics, manufacturing and/or R&D space.
Cost Reduction Redux
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