LAKELAND, FL-In a move that will see 100 truck terminalproperties across the US shuttered, FedEx is merging its FedExFreight and FedEx National LTL networks. FedEx will cmbine theoperations by Jan. 30, 2011. About 1,700 workers will beterminated.

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Memphis-based FedEx made the announcement in its fiscal firstquarter earnings report on Thursday. The FedEx Freight businessreported an operating loss of $16 million on revenue of $1.26billion. Last year, revenue was $982 million, but the company hadan operating income of $2 million. The LTL business postedoperating losses in the quarter, driven by lower yields and highervolume-related costs. Yields declined 3% year-over-year.

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“As manufacturing is down in the United States, so too is thedemand for this type of space,” Ted Morandin, founder of MorpropAdvisors, a commercial real estate underwriting and investment firmin Annapolis, MD, tells GlobeSt.com. “The FedEx consolidation comesat a time when we are already looking at a 40% vacancy rate in thetransportation real estate sector. It’s extremely soft.”

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After seeing rapid declines since 2007, manufacturing is onlyabout 11% of US gross domestic product. Although the Institute forSupply Management reports its US manufacturing index rose to 56.3%in August from 55.5% in July, manufacturing has yet to officiallyrecover from the worst recession since the 1930s. FedEx is not theonly freight liner to suffer—or the only one to put industrialspace back on the market.

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“There are other very large players in the sector that haveexcess space,” Morandin says. “In all likelihood, FedEx is going toneed some inventive people to try to figure out alternative usesfor this property. FedEx might not be able to sell it right now.They might have to lease it because this isn’t traditionalwarehouse space. It’s harder to move.”

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In fact, it may not only be hard to move. It may be obsolete.Transportation real estate may not recover in six months, 12 monthsor even 20 months, Morandin says. And it’s not just cross-docks forshipping that are seeing vacancies and potential obsolescence.

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“It has been a brutal three years for the transportationsector,” Morandin says. “If you looked at the national vacancy rateon industrial, I guarantee you it’s nowhere near 30 percent. Butwhen you get into the transportation sector, including ports, railyards, container yards and intermodal facilities, you seewidespread vacancies due to the decline in manufacturing. Some ofthese properties may have lost their original purpose.”

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