From Site Selection magazine, September 2004

The 2004 Global
Infrastructure Report

Corporate logistics requirements have airport cities morphing into 'aerotropoli'; seaports are deepening channels for tomorrow's superfreighters; and bridge, tunnel and road projects will fix bottlenecks in the movement of people and freight.



irports have long been economic development engines for local areas and regions, but their potential economic significance is only now being understood by area developers, corporate site seekers and urban planners. Like never before, airports are central to businesses' ability to compete given the heightened role of logistics and distribution in meeting customer and shareholder expectations. Their importance in this respect cannot be overstated.
Dr. John D. Kasarda
The Kenan Institute of
Private Enterprise

      "Airports will be as important to business location and urban development in the 21st century as automobiles and trucks were in the 20th century, railroads were in the 19th century and seaports were in the 18th century," says Dr. John D. Kasarda, a leading
Dr. John Kasarda of the Kenan Institute is not the first to recognize the power of transportation modes in determining development patterns. In fact, his "aerotropolis" model has a lot in common with the ideas expounded by H. McKinley Conway, founder of Site Selection publisher Conway Data, in his 1977 book The Airport City.
      With chapters devoted to multimodal, intermodal and transmodal systems; design factors for airport projects and business parks; distribution hubs; "fly-in" development and planned airport communities, Conway addresses the movement of both people and goods in a future that is now upon us. He sees general aviation and smaller airports as playing an important role, especially where corporate executive travel is concerned. And he recounts meeting such aviation luminaries as Orville Wright himself, as well as Airport author Arthur Hailey, who once said, "The future, viewed from high altitude, seems limitless, as in fact it is."       To read more about this forward-thinking book and other titles in Conway Data's Development Library, click here to visit the SiteNet Book Store.
expert on airport-centric development. Kasarda is the Kenan Distinguished Professor of Management and Director of the Kenan Institute of Private Enterprise at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.
      Evidence of airports' heightened importance in global commerce and economic development can be seen in Memphis, Tenn.'s emergence as a world class center of logistics and distribution and Louisville, Ky., too, thanks to the Federal Express and UPS operations in those cities respectively. Countless e-commerce companies have established facilities at or near those cities' airports, enabling them to offer next-day -- even same-day --delivery of time-sensitive goods. Such "airport cities" can be found in locations around the world wherever major passenger and air cargo hubs have attracted significant development. But a newly emerging phenomenon could make these hubs pale in comparison.
      "Substantial evidence is accumulating that major airports are generating concentrations of commercial activities that are leading to a new, aviation-linked urban form -- the aerotropolis," says Kasarda, who consults with airport authorities worldwide on logistics and air transportation infrastructure. "Planners and developers who design and build infrastructure and facilities that are consistent with the new form and function of the aerotropolis can contribute substantially to the economic competitiveness of urban areas and to the emerging needs of business."
      Today's economy is increasingly based on supply-chain-linked business processes, such as just-in-time and custom manufacturing, and the global shipment of goods that Kasarda describes as "small, light, compact and high value to weight." These include microelectronics, pharmaceuticals, digitized auto parts, medical instruments and perishables. Air cargo and air logistics are making it possible for companies to compete globally and to compete efficiently by delivering product components to manufacturers or finished products to customers when or before they are expected. Even if customers can wait, they won't wait in many cases.
      "Logistics has become the major factor in gaining competitive advantage for most firms because today speed and agility are as important as price and quality for manufacturers and other goods producers to compete," argues Kasarda. "Logistics is now core to the bottom line profits of organizations. It is no longer viewed as a support function whose costs are to be minimized, but rather a core function whose value-adding benefits need to optimized."

Anatomy of an Aerotropolis
      The difference between an airport city and an aerotropolis lies in the latter's resemblance to an actual metropolis, or urban area. The airport and surrounding hotels, retail, distribution centers, light industrial parks and so forth serve as the central business district, employing dozens of thousands of workers. In the case of an aerotropolis, development can extend 10, even 20 miles (16-32 km.) or more away from the center, incorporating additional development, such as office and research parks, districts zoned for specific purposes, foreign trade zones, entertainment and conference facilities and even residential developments -- all of which is anchored by the airport city.
      Although the concept is still new, aerotropolis projects already exist or are under way around the world at both existing airports or airport cities (Denver International, Hong Kong International, Seoul Incheon, Paris Charles de Gaulle and Ontario, Calif.) and those now in planning and development (Suvarnabhumi in Bangkok and the expansion of Beijing's Capital International Airport).
      Amsterdam Schiphol Airport, employing 58,000 people, is perhaps the closest thing to a mature aerotropolis there is. Besides being a major international passenger and cargo facility, it features intermodal transportation, including rail service to downtown Amsterdam and to all major cities in Western Europe.

The Port of Duisburg, located at the confluence of the Ruhr and Rhine rivers in Germany, is Europe's largest inland port.
Source: Duisport Photo: Felden

      Retail is a substantial component of the facility's economic output, with pre- security-screening shopping available on weekends when other stores in the area are closed. Major logistics centers and flower marts are located at Schiphol, as are corporate headquarters and other business centers. Outside the airport city via two motorways are numerous logistics parks, office parks, merchandise marts and hotel and entertainment complexes.

Things Are
Bigger In Texas
      One of the clearest examples of an aerotropolis taking shape in the U.S. is the one anchored by Dallas-Ft. Worth (DFW) International Airport, which by itself takes up 18,000 acres (7,300 hectares).
    Significant development is under way in Euless, on the southwest side of DFW, and to the east in Irving -- particularly at Las Colinas, a major development on I-35 on the way into Dallas. Las Colinas is a 12,000-acre (4,800-hectare) development with 21.2 million sq. ft. (2 million sq. m.) of office space, 8.5 million sq. ft. (790,000 sq. m.) of light industrial space, 1.3 million sq. ft. (121,000 sq. m.) of retail, more than 13,000 single and multi-family homes, more than 3,700 hotel rooms and more than 75 restaurants.
      But that's not all. Just east of Las Colinas is Dallas Love Field, the original airport serving Dallas and the home base of Southwest Airlines. Development of the entire I-35 corridor between DFW and Dallas is booming (much like the growth that has been taking place on the corridor between Dulles International Airport in northern Virginia west of Washington, D.C., and the capital).
Property development outside of aviation is a major component of airport expansion projects at Dallas-Ft. Worth International Airport and many others throughout the world.
      Infomart and Market Center are two major merchandise marts on the corridor that draw hundreds of thousands of exhibitors and visitors to the area from around the world. North of Fort Worth is the Alliance Airport cargo and logistics complex, which serves as a sub-hub to the DFW-based aerotropolis.
      Several other U.S. airports are giving commercial, non-aviation related activities a high priority in their development planning. These include the airports in Denver, Colo.; Detroit, Mich.; Las Vegas, Nev.; Minneapolis-St. Paul, Minn.; New York (JFK); and Pittsburgh, Pa.
      Internationally -- besides the airports already mentioned -- such planning is under way at Frankfurt Main in Germany, Barcelona International, Dubai International, Helsinki Ventaa, Singapore Changi, Stockholm Arlanda, Milan Milpensa and others.
      "This leads to a very interesting development that is just now being recognized in the siting and location fields," says Kasarda. "As the airport area develops as a brand -- locate at O'Hare or around DFW -- it is attracting businesses to be a part of that brand. Airports now have image, which is serving as a magnet. Even though companies locating there may not be directly facilitating movement of passengers or cargo, being located in the airport city or aerotropolis involves branding."
      The effect will likely be an increase in the value of property falling under the brand's domain, assuming a growing economy and a continuing increase in the volume of world trade and related demand for transportation and logistics services.
      The increasingly critical role of logistics, too, is driving up airport site values, which is why AMB Property Corp., a San Francisco-based real estate investment trust, recently acquired the 3.4 million sq. ft. (315,860-sq. m.) portfolio of 37 airfreight buildings of International Airport Centers. The properties are located at seven international airports in the U.S. where air cargo activity is expected to remain strong, including JFK in New York, Los Angeles International and Seattle-Tacoma International.
      "The way companies do business today, they need every edge they can get, and logistics is part of that," says Steve Lueck, AMB's vice president and asset manager, airport facilities. "You can have the best product, the best R&D and the best marketing, but if you can't get your product to the user through the
 The Kenan Institute of Private Enterprise
supply chain efficiently, you will lose. So logistics is a key part of the process, which is behind the emergence of the third-party logistics providers, who are among our largest customers. They are a value link in the supply chain, providing more than a way to get a box from here to there. They provide the efficiency that everyone is looking for, and we are benefiting from that."

Larger Ships, Greater
Global Trade Fueling Seaport Projects
      Logistics, transportation and related infrastructure certainly have an impact on seaport location too. Take Tower Automotive's recent decision to locate a new pressed parts plant at the Kablerfeld Logistic Park in Duisburg, Germany. The Port of Duisburg, located at the confluence of the Ruhr and Rhine rivers, is Europe's largest inland port. Tower will invest $18.4 million in the facility, which will supply Mercedes-Benz factories in Dusseldorf to the south and Ludwigsfelde far to the east, just south of Berlin.
      In the competitive world of global shipping, size matters too, as ship capacities test port capacities in turn.
      In July 2004, Samsung Heavy Industries, the South Korean heavyweight in container ship building, delivered the world's largest container carrier to Seaspan, the largest Canadian marine carrier. The 8,500-TEU (twenty-foot equivalent unit, the international standard measure for containers) super carrier measures 334 m. (1,096 ft.) in length and nearly 43 m. (141 ft.) across. Taking eight months to design and another eight months to build, the colossal ship was put into service immediately on Far East and American routes.
      The new ship breaks Samsung's previous world record for the largest container ship, but its vessels will only get larger in coming years. The company is developing a 10,000-TEU ship and is also designing a 12,000-TEU container carrier.
      Increased global trade and larger ships are prompting expansion projects at ports around the world. The increasing size of container ships requires channels beyond the current depths of most U.S. ports, says Kurt Nagle, president and CEO of
Steve Lueck
the American Association of Port Authorities (AAPA). Only a few ports on the West Coast, such as Los Angeles and Long Beach, have channels deep enough to accommodate the behemoths.
      "There are needs at most facilities to deepen at least areas of the port to handle that size vessel," Nagle says.
      As more large vessels are deployed and accommodated by larger, deeper ports, Nagle says there will likely be a shifting of the smaller ships to other ports. So, not every port will need to deepen its channels to the 52- to 53-ft. (16-m.) level, he says.
      Nagle says infrastructure improvements have historically been ranked by AAPA's members as the biggest challenge facing the industry. Now, security needs at ports are competing for limited dollars.
      "While infrastructure continues to be a major challenge, it has been supplanted by security needs and the inherent costs in that," Nagle says. "The limited funding of public ports is being shifted to security needs and making infrastructure improvements more problematic. There is a legitimate concern over finding funding for both."
      The need for infrastructure improvements is acute as projections call for shipping trade to double between now and 2020, Nagle says. The pace of growth is likely to be quicker on the West Coast as China and other Asian countries continue to pour goods into the U.S.

Tacoma Boosting Port Status
      The Port of Tacoma, Wash., already ranks as one of the nation's leading cargo entries, handling more than 1.7 million TEUs in 2003. A new terminal set for completion in October 2004 will add capacity for 840,000 containers.
The Port of Tacoma is in the midst of a five-year, $341-million expansion that will see it greatly increase its container capacity.
The terminal, which will serve Evergreen Marine Corp., a Taiwan-based container shipper, will be the largest single container terminal north of Los Angeles. A planned second phase will add capacity for about 400,000 more containers.
      Also part of the port's $341-million, five-year, capital improvement program is the Marshall Avenue Auto Terminal, which opened in 2003. The $40-million auto-processing facility allows the port's customer, Auto Warehousing Company (AWC) to continue expansion of auto imports.

The Dredge Report
From Down Under
      Proposed and planned projects in Australia and New Zealand include major efforts to enlarge channels to accommodate larger container ships.
      The Port of Melbourne Corporation (PoMC) is proposing a AU$400 million (US$280 million) project to deepen the main commercial shipping channels to the port to allow the larger container ships to enter. The current depth means more than 30 percent of container vessels entering and leaving the port cannot load to full capacity. PoMC has released an environmental effects statement, and the project is pending final government approval.
      The Port of Melbourne handles AU$70 billion (US$48.9 billion) of trade annually and directly and indirectly employs about 80,000. It is planning an AU$80 million (US$56 million) development at Victoria Dock to transform a vacant site into a cargo terminal. The project will create about 300 jobs when the terminal becomes operational in 2008.
      Westgate Ports Pty. Ltd. will develop the terminal and plans to move at least 50 percent of freight in and out of the terminal by rail. The company also plans to develop an inland port linked to the new dock by existing rail infrastructure. The Victoria Dock development will also include general warehousing facilities.
      "The port is vital to our farmers, and to regional Victorians," said Peter Batchelor, Victoria's minister for transport. "It handles 85 percent of the nation's dairy exports, 67 percent of our wool exports and 65 percent of Australia's rice exports."
Auckland, New Zealand, is deepening the commercial shipping lane into its port and boosting container capacity.
      Up Australia's east coast, the Port of Brisbane has embarked on a AU$90 million (US$63 million) project to reclaim 230 hectares (568 acres) of land from the sea. The reclamation will involve building a 4.5-km. (2.8-mile) seawall and filling the enclosed area over approximately 20 years using material from maintenance dredging. Government officials estimate the new land might generate more than 1,800 jobs as industry expands into the area.
      Across the Tasman Sea from Brisbane and Melbourne, the Ports of Auckland is in the midst of a NZ$55 million (US$34.5 million) project to deepen the commercial shipping lane into New Zealand's largest container terminal, operated by Axis Fergusson. The first phase of the reclamation project will allow space for an additional 100,000 containers annually and will be completed within three years.
      Activity related to the Ports of Auckland supports more than 173,000 jobs in the region, according to Geoff Vazey, Ports of Auckland chief executive.
The Port of Brisbane, Australia, is reclaiming land from the sea to greatly increase its size.

Shanghai Port
Taking Shape
      Shanghai is known for its architectural wonders, but it would be hard to rival the deepwater port project developing southeast of the city. Shanghai has experienced explosive growth at its current port in recent years, but its location at the mouth of the Yangtze is too shallow to accommodate large ships. Despite the constraints, Shanghai has become the world's third-busiest container port.
      The first phase of the massive Yangshan port project south of Shanghai continues to move toward a 2005 completion date. The master plans calls for development of 50 container berths by 2020 at the port being constructed on the islands of Xiao Yangshan and Da Yangshan in Hangzhou Bay. Total project cost is estimated at $16 billion to $18 billion.
      Connecting the mainland to the new port is the 31.5-km. (19.5-mile) Donghai Bridge, set for completion by the
end of next year.

Waiting For the Feds
      It seems that no matter what mode, hundreds of rail, road and bridge projects are hanging in limbo as the U.S. Congress continues to delay passage of a full-fledged transportation bill. At press time, Congress had passed a fifth extension of federal transportation department programs, with negotiations on the long-term bill expected to resume in September 2004.
      But with the help of a flurry of summer 2004 federal grants, project work goes on, as does the trade those projects are designed to facilitate. Go no further than Detroit for evidence of infrastructure's role as industrial lifeline.
      That's where the Jobs Tunnel -- comprising a new and enlarged rail tunnel to Windsor, Ont., and a new truck route through the old one -- is currently undergoing environmental review. The route is vital to both the automotive industry and the border economy, as the Ambassador Bridge over the Detroit River, which sees 10,000 trucks a day, is bursting at the seams. The US$430-million project recently received the endorsement of the chairman of the National Association of Manufacturers, Richard Dauch, who is co-founder, chair and CEO of American Axle & Manufacturing. And it got the nod from the AFL-CIO. But the endorsement of everyday people may be just as meaningful, especially those involved in the industrial trade that transpires on that route.
      "I am personally sick and tired of the hours of waiting in line just to deliver into Ohio," writes one commercial truck driver on the Detroit River Tunnel Partnership's Web site. No doubt that driver's clients are, too.

Regions Work
Toward Rail Feasibility
      Moving people can be just as crucial to corporate prospects as moving freight. Several U.S. regions are racing to be the first to attract federal funding for regional high-speed passenger rail systems. In the meantime, smaller regions are moving forward with more concrete plans.
      In the Triangle area of North Carolina, Triangle Transit Authority (TTA) is still going forward with a revised plan for regional rail transit that will link Durham, Research Triangle Park, Cary, Raleigh and fast-growing North Raleigh. Final design work began in 2003 for the $724-million project, and a federal grant of $17.2 million was awarded in July 2004. But the still-stalled federal transportation bill has more than 180 other projects around the country anxiously awaiting funding.
      Meanwhile, one of the main funding sources for the TTA project -- a rental car tax in Durham, Orange and Wake counties -- has seen flat revenues since 2001. But the real reason for the revised scope (from 16 stations to 12, with the remaining four delayed beyond 2011) is that TTA and other agencies around the country have been instructed by the Federal Transit Administration to remove from their plans lease options on railcars and other infrastructure property. Such options would have generated $28 million in revenue for TTA.
      Outside the nation's capital, federal officials gave the go-ahead in June 2004 for $45 million worth of design work towards an expansion of the Washington Metro rail system into northern Virginia. The first phase of the proposed two-phase project would cost between $1.5 billion and $1.8 billion and extend from West Falls Church to Reston. The first phase would be half-funded by the federal government, and 25 percent each from the Commonwealth of Virginia and Fairfax Co., Va. Another extension into Maryland received a $32.8-million federal grant in July 2004.
      The Maryland Transit Administration will see the 23-mile (9.3-km.) Central Corridor light rail line continue development thanks to another July 2004 grant of $23 million from the U.S. Dept. of Transportation. The line, expected to be complete in 2006, will serve Baltimore, Baltimore Co. and Anne Arundel Co.
      In Chicago, Mayor Richard M. Daley's Chicago Region Environmental and Transportation Efficiency (CREATE) regional rail plan involves an overall upgrade to the area's rail infrastructure. The six major freight railroads that serve the Chicago market would contribute $210 million to the $1.5-billion program.
      In addition, plans are moving forward for a $213-million express transit train route from Chicago's center city to both O'Hare and Midway airports. The hub for the service would serve as a check-in point for airline passengers. While most of the funding would come from city coffers, around $41 million would come from Mills Corp., a retail REIT based in Arlington, Va., which wants to develop the property around the hub station.
      Looking east, an update of the 10-year-old Detroit-Chicago High-Speed Rail Corridor Program Study is under way. The family of projects would cost $550 million to implement.
      Further west, Union Pacific Railroad in June 2004 broke ground on its new Dallas intermodal terminal, jointly located in the cities of Hutchins and Wilmer, along the UP's main line between Dallas and Houston. The facility, in an industrial park developed by Prime Rail Interest, should be operational in June 2005.
      Just to the south, UP is involved in another unique project: simultaneous development of UP facilities in Cameron County, Texas, and facilities just across the border in Matamoros, Mexico, belonging to Transportacion Ferroviarias Mexicana. Kansas City, Mo.-based HNTB is designing the facilities, which will involve $22 million worth of relocation railway in Cameron County, a 2,300-ft. (700-m.) tall rail bridge over the Rio Grande and an arterial roadway. The project is projected to be completed in late 2005.

Big Plans Take
Big Vision Up North
      In Canada, Ontario's Ministry of Public Infrastructure Redevelopment in July 2004 issued a sweeping growth plan for the Greater Golden Horseshoe region that incorporates plans for roads, transit, water, sewers, schools and hospitals. Such vision could cost as much as US$75 billion over the next 30 years.
      The Greater Toronto Area (GTA) transportation plan focuses on two main corridors connected to border business: the GTA-Niagara corridor and the GTA-Guelph/Kitchener/ Waterloo corridor, including traffic relief related to Highway 401 and the busy border crossings at Sarnia and Windsor. The 10-year growth plan for the Golden Horseshoe considers such fiscal mechanisms and incentives as gas tax revenues, tax-increment financing, land transfer tax rebates, development charges and property-tax reform.
      In British Columbia, a combination of projects on the coast and inland is adding up to some US$4.5 billion in road, tunnel and bridge work over the next decade. The Sea to Sky Highway upgrade in the Vancouver area is seeing a hefty portion of that investment. Approaches and a bridge across Okanagan Lake near Kelowna, upgrades of the Trans-Canada highway and highway corridors to the B.C.-U.S. border are receiving additional attention and funding.
      Receiving just as much attention is the proposed passenger rail line between Vancouver, its airport and Richmond, B.C., with a price tag of US$1.1 billion, and another Lower Mainland transit line projected to cost $603 million.
      And in another infrastructure realm altogether, B.C., Alberta and Canadian officials and others are mulling Alaska Gov. Frank Murkowski's proposed $23.5-billion railway, natural gas pipeline and highway project.

Roads to Somewhere
      Continuing to the West, major projects valued in the billions are under way to link Russia to China via both rail and road infrastructure, mirroring the pipeline activity already apparent in the region. On a bigger scale, 32 countries have agreed to an Asian Highway Network plan, although funding for the 87,000-mile (140,000-km.) network would total nearly $16 billion. A full 16,000 miles (26,000 km.) of that network would occur in China, and are scheduled to be complete by 2010.
The Woodrow Wilson Bridge south of the Washington, D.C., metro conveys as much as $100 billion worth of commerce annually, according to officials with the bridge's $2.44-billion rehab project.
      The fast-rising industrial economy of Brazil is seeing an equally large-scale project, the transformation of its 1,097-mile (1,765-km.) BR-163 highway from partially unpaved road to superhighway. While deforestation concerns hover over the project, its completion would not only smooth agricultural exports (trade negotiations notwithstanding), but, according to a report in The Economist, reduce annual freight costs for manufacturers in duty-free Manaus by US$99 million.
      Interchange projects are proving as vital as long stretches of highway. The $290-million Grandview Triangle project in Kansas City, Mo., designed by HNTB, is ahead of schedule in its rehab of a major highway tangle that involves some 540 acres (219 hectares) and one million sq. ft. (9,290 sq. m.) of bridge deck work. When complete in 2008, the interchange's capacity will be increased from 250,000 daily vehicles to 440,000, and the new design has the potential to eliminate the equivalent of one accident per day.
      Other road and interchange programs of note include an 18-month, $100-million improvement plan around the agricultural and transit hub of Decatur, Ill., and a new I-65 interchange near the growing industrial community of Cullman, Ala., which is also on tenterhooks awaiting federal funding.

Bridges to Prosperity
Need to Cross Funding Chasm
      The Appalachian Development Highway System inches closer to completion, promising to close the circle of transit and open up new opportunities for this region. One of the next projects in the region is the $90-million Blennerhassett Island Bridge near Parkersburg, W.Va., which will complete a 300-mile (483-km.) highway corridor from Cincinnati to Bridgeport, W.Va. The ADHS program overall would receive some $2.7 billion in funding under the Bush administration's transportation bill.
      Another $90 million is slated for the $234-million Hoover Dam Bypass bridge project, where work is projected to begin this fall toward a pushed-back 2008 completion date. Nevada and Arizona officials in June 2004 authorized the use of Grant Anticipation Revenue Vehicle (GARVEE) bonds to keep the project moving forward pending federal action. The current highway that traverses the dam handles 13,000 vehicles a day, but no trucks since 9/11. Instead, that crucial commercial traffic has been making a 23-mile (37-km.) detour, passing costs along to industry and consumers. While work on the span itself is now in the digging phase, the approaches on either side are well under way, with a cumulative value of $52.4 million.
      But the biggest project of all may be the Woodrow Wilson bridge rehab in Maryland, Virginia and the District of Columbia. The bridge itself will cost $600 million out of an estimated $2.44 billion to be spent on the whole complex of projects, with $1.63 billion of that total coming from the federal government. Total work should be winding down by 2008. Site Selection


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