BOSTON-Forget about the reality or non-reality of the so-called NAFTA Superhighway, suggests Torto Wheaton economist Luciana Suran. It’s not just NAFTA, or the North American Free Trade Agreement, that logistics companies and distribution-space builders should be looking at, but also nafta, the Spanish word for gasoline. In a white paper released at the end of July, Suran emphasizes the growing role of long-distance rail transport due to the rising price of oil.

“High gas prices, if sustained for a long period of time, could force some shippers to rethink their distribution routes,” she says. “During the days of cheap gas, nobody gave a second thought to the idea of trucking imported goods from Asia across the country after being unloaded at West Coast ports. But higher fuel prices are making intermodal transportation using multiple modes like rail, truck, and boat look much more appealing.”

As evidence that the change is already occurring, Suran says the locations with the highest absorption levels this year, based on figures from CB Richard Ellis, are inland markets with strong rail connections. Among the top 10 markets for absorption, only Houston was an exception to the rule in that it is a seaport. At the same time, it is “inland” in the sense of being away from the Atlantic and Pacific coasts and also has strong rail connections. The top two cities for absorption were Memphis and Kansas City. Others on the list included Indianapolis, Las Vegas and Nashville.

Significantly, the economist points out, Kansas City and Memphis combined absorbed over seven million sf between January and June, equivalent to more than half the 13 million sf the US industrial market shed in the form of outdated space in the same period. And she says we can expect the two markets to continue to experience high demand, at least partly due to their intermodal capabilities.

As she notes, Kansas City is the nation’s second-busiest rail hub, behind Chicago, and first in terms of tonnage. An earlier article reports current development of three new major rail-served projects to the market and another at Kansas City International Airport totaling more than 20 million sf. As for Memphis, at the end of July BNSF Railway and CSX Corp. announced plans to invest more than $100 million to expand their Memphis intermodal facility. The investment will double the capacity of the 185-acre facility and enable it to handle one million containers per year. The companies said the decision was made in response to a surge in market demand triggered by soaring fuel prices.

Of course, says Suran, the capital-letters NAFTA does play a role in the growth of inland markets, as the majority of trade among the three nations travels through the central regions rather than along the coasts. But she believes trade among the US, Canada and Mexico is likely to grow whatever happens with the agreement itself. Two years ago, Canadian National Railway began a $100 million of its Memphis train yard, its second largest US facility after Chicago, and the carrier is looking to substantially upgrade rail service to inland cities in both Canada and the US from the recently completed Port of Prince Rupert. Similarly, Kansas City Southern is upgrading the tracks and facilities between Mexico’s Port of Lazaro Cardenas and Kansas City to accommodate growing trade along that route.

While as much trade among the three NAFTA countries still travels by road as by rail, the future appears likely to tell a different story. First, establishment of regular truck transport between the US and Mexico faces growing opposition in Congress. Even the pilot program allowing a limited number of trucks to pass freely across the Mexico-US border, rather than having to transfer goods from one nation’s trucks to the other’s at the border, is threatened with elimination.

Second, opposition is growing to the increasing number of tractor-trailers on US roads. In July, Demographia, a market research and urban policy consultancy based in Belleville, IL, issued the Congestion Relief Index, a study of traffic congestion in 82 major urban areas. The study mintains that switching 25% of freight volume from trucks to rail could save US drivers an average $985, 79 gallons of fuel and 41 hours of delays a year by 2026. It also says the switch would reduce air pollution by 920,000 tons annually.

“We can surely expect NAFTA traffic to increase regardless of whether a NAFTA Super Highway is constructed,” says Suran. “Taken together, these trends lead me to believe that regardless of any changes to NAFTA, external economic forces will bring about a US industrial market that is shaped more by our northern and southern neighbors than in past years.” With that change, she adds, will come greater reliance on rail and intermodal facilities.

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