Supply Chain

Transportation as Economic Development

By Chris Steele, President Real Estate Line of Business, TranSystems


The news is finally out — the United States is in a true recession and has been since December of 2007.

This comes as no surprise to those of us who have been working with companies rethinking their real estate and business growth plans, placing projects on hold, or reinventing themselves for leaner times. Companies who want to grow must do so under conditions of capital constraint and reduced credit availability.

Jobs have disappeared across the globe. Localities, states, and the nation as a whole have been searching for ways to capture a greater share of the real estate and operational investment that remains. In order to do so, each of these communities needs to re-discover what makes for a successful business and investment location.

Transportation as a Location Driver
Any company looking to build or lease a new facility — or decide where to make a new investment — must examine a number of variables that may impact the success of the program. For a manufacturing or distribution facility, the specifics of the business plan will determine the relative importance of the following factors, but each must be weighed and balanced against the others.

Total operating cost
Availability and quality of labor
Proximity to major highways
Drive or rail time from ports (or airports)
Access to major consumer markets (or to major clients)
Highway, rail, and air congestion
Proximity to intermodal terminals
Quality of life
Cost of living index
Regulatory and taxation environment

Impacted by Infrastructure
Interestingly, each of these items either impacts or is impacted by the transportation infrastructure. Highway infrastructure impacts the ability of goods to move by truck quickly and at lower costs. It also may or may not allow car traffic to move freely, expand labor sheds, and improve job opportunities.

Other transportation modes provide flexibility for longer hauls and for access to regional resources. This flexibility addresses cost concerns due to fuel prices and improves environmental quality. For example, more emphasis may be placed on rail — both for movement of goods and of the public. Likewise, communities with direct access to navigable waters — ocean or river —benefit through improvements to water-borne transportation due to the cost-effectiveness and potential environmental benefits of balancing these modes in an overall transportation network.

Traffic reduction also brings added benefits to the overall quality of life (due to reduced accidents, injuries, and fatalities) and through improved access to the region’s amenities. If done properly, traffic reduction also improves the quality of life by enhancing the built and preserved environment, reducing emissions, and opening other opportunities for the local population.

These benefits make a community or region much more attractive as a place to do business. Movement of goods is easier and cheaper. Access to labor is improved, and it becomes much easier to attract trained or specialized talent to the area. Hence, the region becomes more successful in attracting new business and investment. Businesses already operating in the area likewise improve their chances for survival and success.
In addition to these long-term impacts, investing in the transportation infrastructure network creates construction and manufacturing jobs immediately.

Economic Development Strategies
Bridges to nowhere notwithstanding, economic prosperity cannot be gained simply by building roads, rails, and ports without a plan. Regions — and the nation as a whole — must look at the current situation as an opportunity to invest in a network that could truly meet goods movement, national security (through energy independence), economic opportunity, and environmental goals for decades to come.

We must be careful how we do this, as some well-intentioned measures could in fact impair forward progress. For example, some current congressional actions (HR 2125 and HR 1650 for example) have correctly identified rail access as key to goods movement, but through additional regulation could effectively kill rail carriers’ motivation to make necessary improvements to the network.

The new administration and state and regional economic development agencies have an unprecedented opportunity to build teams of the willing — including shippers, producers, carriers, builders, and the communities they serve — and encourage them to collaborate to make new growth possible.

The ongoing economic crisis, the news of the existent recession, and the advent of the new administration forced a slight detour from our planned column schedule. Next month, we will return to our theme of strategies for integrating real estate and logistics planning more completely.