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Development Opportunities North And South Of The Border

Development Opportunities North And South Of The Border

Christopher Steele – Cargo Business News – February 2010

National borders mean very little when speaking about banking and trade. We in logistics have consistently lived with the reality of the global economy, and yet real estate markets – even in warehouse and logistics in the post-NAFTA world – still look at the U.S., Canadian, and Mexican markets separately.

This perspective is changing. The U.S. real estate community is beginning to recognize our neighbors’ strengths. As importantly, several communities and agencies in both Canada and Mexico have put together aggressive strategies for becoming key nodes in the North American supply chain.


Canada already has extensive channels in the North American supply chain, with unique development opportunities along the line. Halifax and Prince Rupert have seen increased traffic in both bulk and container volumes (before the recession), and much of this traffic flows southward into the United States for consumption and further production. Canadian National’s acquisition of the Illinois Central railroad in 1998 resulted in the only truly continental railroad – one that stretches from Halifax in the east to Prince Rupert in the West and from New Orleans in the South to Canada’s Northwest Territories.

Additionally, the country’s banking sector was less affected by the crises of the past year, allowing investors and communities more flexibility now. Investors are watching with interest as cities along the Canadian Shield develop strategies for increasing their share of global trade.

The Province of Saskatchewan and the City of Winnipeg have both announced plans for inland ports within their jurisdictions. Winnipeg’s offering, CentrePort Canada, is somewhat further along, having announced its board of directors late this summer. This facility could have as much as 20,000 acres of mixed industrial and logistics development, and provides for direct access to two Class I railroads and a major airport, in addition to major road access.

Even smaller facilities are getting into the game. Ashcroft Industrial Park – located along both the Canadian Pacific and the Canadian National at the western foot of the Canadian Rockies – is making new investments in infrastructure that will allow for growth in intermodal container traffic to add to its existing bulk transloading business.

Much of the above builds on the strength of new port developments at Prince Rupert (in British Columbia) and Melford (in Nova Scotia). Prince Rupert began the transition to a container port in 2005 and has already established itself as the closest North American port to Asia, significantly cutting transport time. While the recession has cut into projected growth at the port, expansion is already underway, and capacity will be 2.5 million TEUs annually when completed. Melford Terminal, located on the Strait of Canso in Nova Scotia, provides similar advantages in the East. Given its extreme eastern location, this planned port will be the closest deep-water terminal to both Europe and the Suez Canal. Construction is expected to begin in early 2010, with operations to commence in 2011. Both Prince Rupert and Melford are evaluating options for freight-related developmentalongside the port facilities.

Of course, Canada has significant consumption zones in its own right, and U.S. developers, such as First Industrial, have begun to make investments in metropolitan Toronto and have plans for more.


Mexico, while strong in manufacturing and assembly, has experienced more fits and starts in logistics real estate development over the past years. However, the country has significant advantages for some forms of water and rail-based development.

Like Canada, Mexico has begun to expand port operations for containerized freight for eventual shipment to or through the United States. The port of Lázaro Cárdenas is expanding from a capacity of 160,000 to 2.2 million TEUs annually, and after a pause, API has submitted anew bid to build a container terminal at Guaymas.

Ferromex and the Kansas City Southern would then provide direct rail access to U.S. markets.

Guanajuato City, an inland port roughly 230 miles northwest of Mexico City, could eventually become the southern terminus of a North American super-logistics corridor. Canadian partners (such as the province of Saskatchewan) have already begun trade negotiations with Mexican and Guanajuato City officials for the southward movement of trade.

Each of these developments is currently soliciting investment from American and offshore developers for freight handling, warehouse and other facilities. Each brings a slightly different solution to today’s freight and logistics problems. Each could provide interesting investment options for future global trade.

While we will cover European, Middle East, and African (so-called EMEA) developments in two months, current events will intercede next month with a review of proposed changes to FAS 13. Perhaps that warehouse lease won’t be a lease too much longer!