The State of Infrastructure 2012

The keyword on the Southeast's infrastructure scene is ports. Although roadway and railway projects are seeing some attention, ports are the critical link to commercial real estate growth in many Southeast regions.

According to the recent Urban Land Institute/Ernst & Young Infrastructure 2012 Report, trans-Atlantic freight could double over the next 15 years, and deep-hulled, super-post-Panamax container ships will be able to pass through a widened Panama Canal channel into the Atlantic by year-end 2014.

"Infrastructure won't reach capacity without the real estate solution alongside," says John Carver, head of the industrial real estate group at Jones Lang LaSalle. "At the same time, the commercial real estate industry is aware that it can be more productive with development money by clustering alongside the rail and seaport systems."

The report points to Charleston, SC and Savannah, GA—both of which are proposing large-scale dredging and terminal projects budgeted at more than $1.3 billion each—and Miami's nearly completed $1-billion port tunnel and $150-million harbor dredging initiatives.

But Florida is also seeing a unique integrated multi-modal logistics solution through a partnership between the Port of Miami and Florida Inland Port that is expected to help the state emerge as a major gateway for containerized merchandise trade. The inland port can serve as a cost-effective interim destination for cargo until it can be distributed nationwide.

"The customer is driving where the ships go and where the railroads take their products," Carver says. "There's a greater focus on the ultimate shipper, which is the real estate occupier. There's an opportunity to collaborate across industry lines to attract end users to a given location."

With so many Southeast regions needing infrastructure updates—and so many state budgets facing severe shortfalls—the TIGER 2012 Awards offer a silver lining to some cities. TIGER is a program created under the stimulus bill. In Florida, Fort Lauderdale and Tampa won $18-million and $10.9-million grants for a wave streetcar project and downtown multimodal improvements, respectively. And Raleigh, NC won a $21-million grant for Raleigh Union Station.

"The Downtown multimodal transportation loop in Tampa encompasses the priorities Transportation Secretary Ray LaHood and the administration have been pushing—looking for different modes of transportation rather than putting in more highway lanes," says Julie Minerva, managing director of the Government & Regulatory Policy Practice Group in the Washington, DC office of Manatt, Phelps & Phillips LLP. "We won't find new warehouses around the Tampa development, but we'll see other types of commercial real estate, such as retail and condos, spring up."

Beyond multimodal projects, traditional toll roads are seeing traction in Florida markets. Florida already has more toll roads than any other state, according to ULI/Ernst & Young, and is planning a $300-million road-widening project east of Jacksonville. The report also reveals that Florida is moving to a statewide allelectronic transponder system, which should facilitate planned tolling on additional roads and lanes.

Georgia, meanwhile, just took a vote on a one-cent sales tax but it did not pass. That tax money would have been invested in critical infrastructure improvements in the state's 12 economic development regions. Todd Yates, senior vice president of national development and general manager of the Southeast Regional office of the Alter Group, says Atlanta's business community was behind the tax because highway infrastructure didn't keep up with the city's growth in the 1980s and 1990s.

"Atlanta has a massive industrial sector on the south side that distributes to Florida," Yates says. "When the Panama Canal opens up, goods will be shipped to Atlanta via rail for distribution. Atlanta is the linchpin of the Southeast with two major interstates. The rail infrastructure is there, but the question is how much more capacity the road can handle."

North Carolina's Research Triangle is planning major infrastructure investments, including 51 miles of light rail that runs from North Raleigh to Cary, the Research Triangle Park, Durham and Chapel Hill. And the Regional Transportation Alliance business leadership group has made completing the 540 Outer Loop Beltway a critical regional priority.

Across the Southeast, Carver sees the biggest challenge to improving infrastructure as getting all parties to work together. That means, in part, getting private capital off the sidelines and into landside transportation developments.

"In the US, we have not seen the privatization of transportation infrastructure like we have seen in other countries," Carver says. "That trend is going to emerge over the next few years. There's the feeling of a shift occurring in the global movement of goods and cargo. Now's the time to prepare for the future."