I went to the big kick off, grand opening, gala, high roller enclave only for the Allen Group DLG Friday. Check it out here at Dallas Logistics Hub. This is being touted as the biggest thing for Dallas since the DFW Airport. What do you think? Note, we have the vacant ProLogis building south of I 20 on Houston School Road, the 535,000 sf building opposite our old location on Houston School Road, and now Allen Group is going to build a spec (read, no leases) 700,000 sf building at their hub. Hmmmm, will this be enough vacant space? How much is that in total? Hmm, gee,
Professor Elam
Accounting & Investing Info for San Antonio A & M
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7 responses to “Dallas Logistics Hub”
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With the advent of the events of 9/11, supply chain took a dramatic turn towards slower modes of transportation. Restrictions by the FAA in 2002 made it too expensive and time consuming to place goods on commercial airlines; and inherantly caused a shift towards rail and truck freight. Higher fuel costs have hurt the airlines in cargo as well as passenger transportation both…you can only raise tariffs so high before people start asking the question….do we really have to have it that quick???
Pre-planning for increased lead times have shifted the idea that you can offset the time factor if you know how to negotiate better and more frequent ground rates. With capacity increasing on ground modes/slower modes (ie rail, ocean, truck) have been able to deliver a lower cost even with increased fuel costs being a factor. It is simple, they have decreased their variable cost per load by increasing their CM—-simply by an increase in volume. This has caused them to be able to invest more capital in better equipment and inherantly lower their rates. Most of them were struggling for so many years to just BE and now they have a higher net income than ever before….the revenue is there like never before and it looks like it will stay for sometime.
Bottom line on this new idea of a logistics park here in Dallas is that it can work….it really can.
DFW is one of the top 5 logistical concentrated markets in the US due to infrastructure and location…the others are Atlanta, King of Prussia, PA, Denver, Memphis; a few others are debated though. We have a closely located major sea port in Houston, and a market of forwarding experience that is out by the airport already.
I could go on all day about this because I know my business very well. The Asian trade lanes are hot and will remain that way for many years. This may become a cash cow decades from now, as many ideas do, but with the technology that we have right now, this is a very good idea for the times we live in….I can explain even further in class if needed.
JRLikeLike
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in 1973 I went to work for the Developer of Greenway Plaza in Houston TX on the SW Fwy. The first oil embargo was on everyone’s mind and we had office space to rent. The problem was that the owner had built the buildings without any leases, and there were other properties for rent. So, the owner had to take less rent than planned to rent the buildings. While the book refers to past costs as sunk costs, sunk takes on a whole new conotation when the building is not paid for. Taking say 6 bucks a foot for ten floors when the original estimate was 7.50 a foot and we would raise the rent every three years on a thirty story building, well it just won’t work out.
Fast forward to now. WE have the 535,000 sf building on Hampton, the ProLogis building on Houston School, and now the Allen Group is going to build 700,000 s f also speculative, ie no leases. My question, how are they going to hold to their assumptions on lease revenue. Clearly someone who wants to rent can play the three of them off against one another forcing the rent down.
The owner of Greenway eventually lost all his properties due to this very problem. My hair just stands up on my neck when everyone is doing the same thing for the same reason, all convinced it will work. Shades of swine flu, avian flu, the property crash in Texas in 1986, the stock market in Japan in 1990 and for the next ten+ years, invest in emus and ostriches, the dot.coms, just buy Dell Computer six years ago everyone said, NASD is half what it was in 2000, etc.LikeLike
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In logistics its all about location and the ability to access major highways within a short amount of time…I know several forwarding companies that would be very interested in getting their hands on a pc of that real estate down there, regardless if the idea takes off. They have done their homework on the location, but if I were to predict the advent of the next Dell or MSFT, I would not be taking your class…I would be on the phone with a brokerage trading securities.
JasonLikeLike
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Well the Allen Group is not a public company anyway so let’s confine our speculation to your area of expertise
How will this impact employment in the area or will the container building be pretty well automated
Do such firms hire any locals or will they bring folks from out of town in to run things.
I am still skeptical that there is this much immediate demand for space, don’t forget about the time value of money
DLELikeLike
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I think that it will have a positive effect on the area…and considering that the Logistics program at UNT is now ranked in the top 20 in the nation, I think that it will keep the local talent here in town and give them a better opportunity to stay when they are looking after college.
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I think that it will have a positive effect on the area…and considering that the Logistics program at UNT is now ranked in the top 20 in the nation, I think that it will keep the local talent here in town and give them a better opportunity to stay when they are looking after college.
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Bruce sent me the comment below which I thought was interesting, so I posted it.
He/she makes some good points but I can’t say I agree completely. First, yes there has been a lot of growth in the freight industry. Good for the Dallas Hub project but I wouldn’t attribute growth in rail and truck freight to a downturn in the use of Air resulting from the events of 9/11. I believe the term is Faulty analogy.
First, no one uses Air for freight. Airlines ship packages not freight. Rail doesn’t bother with packages they ship tons–many tons. Rail carries the many tons the long haul, and trucks move partial rail shipments on to final destination. Ever tried to ship a single computer somewhere by rail. They’re just not in the business–it would cost way more than Air. Ask Dell. No one ships tons of coal by air either. Well, not since the Berlin Airlift. In fact, a lot of “ground shipments” still go by air at least part of the way.
Airlines use different planes for cargo. Yes, they may throw a mail bag on a passenger plane but they use cargo planes to fly cargo shipments like their U.S. mail carrier contract. While there has been increased security since 9/11 the security for cargo planes is much easier. X-ray the box, inspect for tampering, run the dogs by it and load it on the plane. Not the same as trying to spot one “evil doer” among the thousands in the terminal or the hundreds trying to board the plane. The impact and resulting delays of 9/11 could be measured in hours. Worst case the pkg gets across country at the end of the day. Big, big difference from the many days it would take by rail or truck.
That’s why UAUA just signed a new 5-yr, $600M contract with the US government in Apr 2007 to fly mail. As far as the airlines whining about fuel prices, I’m afraid I’m unsympathetic. In 2006 UAUA paid an average of $2.11 per gallon. We haven’t had it that good since before Katrina–neither have the truckers.
Bruce Wood
San Antonio, former StudentLikeLike
Professor Elam 
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