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Mar. 03, 2014

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INTERNATIONAL MARITIME 92 THE JOURNAL OF COMMERCE www.joc.com MARCH 3.2013 By Mark Szakonyi IT'S NOT HARD to see why major shippers are setting up shop or expanding their dis- tribution operations in Calgary, Alberta. The Trans-Canada and CANAMEX high- way systems intersect at Calgary, giving shippers access to some 50 million people within 24 hours. Intermodal terminals of the region's two Class I railroads, Canadian National and Canadian Pacific, provide service to the major west coast ports, Vancouver and Prince Rupert, British Columbia. Shippers with more time-sensitive freight are using belly capacity in passenger planes and warehousing at the growing Calgary Inter- national Airport. To the north are the Alberta oil sands, which are expected to help expand the Calgary region's population from about 1.4 million now to 3.4 million within 50 years, a brisk pace for Canada. The booming energy sector, coupled with the region's pio- neer "can-do spirit," infuses Calgary with a sense of optimism and energy that one might find in Texas or the Bakken forma- tion in North Dakota. Unlike in many U.S. cities, various gov- ernment entities in the region are addressing the transportation infrastructure needs of the private and public sectors. Some $3.5 billion will be spent on infrastructure during the coming year. Most recently, the city finished the southeast leg of a ring road, a $770 million project that allows shippers to bypass most of the city's urban area. The highway also will make nearby industrial real estate more attractive to tenants. Calgary's strategy appears to be paying off. Target, which opened its first Canadian stores in 2013, also finished construction of a 1 million-square-foot facility in the region last year. Wal-Mart in 2012 completed a lease transaction for a 400,000-square-foot distribution center and opened a refriger- ated 400,000-square-foot DC in 2011, expanding the Calgary warehousing foot- print of the world's largest retailer to more than 2.5 million square feet. Several major retailers have established DCs near the two major intermodal termi- nals in the region. Construction of a facility park for an unidentified user adjacent to CN's Calgary Logistics terminal is under way. CN aims to attract major shippers near its new terminal, which is adjacent to more than 2 million square feet of potential ware- housing space, much like it has done in other markets and archrival CP has done nearby. CALGARY ENERGIZED More shippers are finding the Alberta city's location, infrastructure and energy sector ripe for logistics operations The market also is benefiting from the rapid growth of e-commerce fulfillment, with about 40 percent of the space today being driven by online sales, Meyer said. "E-commerce will double in the next five years," he said. There is no single model for e-commerce fulfillment. Some companies prefer a large facility devoted entirely to e-commerce, while other retailers are willing to combine e-commerce fulfillment and supplying their brick-and-mortar stores. Most e-commerce fulfillment today requires that centers be located outside of cities, in order to find suf- ficient land for developing large, efficient facilities. (See how Home Depot manages it, page 12). As customers demand faster delivery times, however, a need will develop for smaller depots close to or within major population centers. In the days of catalog shopping, a seven-day delivery schedule was acceptable, Meyer noted. Now consumers expect delivery within one to two days. As enterprises such as AmazonFresh catch on, same-day delivery will become more wide- spread, he said. Developers sometimes complain that environmental regulations and community pushback make it more difficult than ever to find suitable locations for industrial prop- erty. Whatever the challenges, the industry is sophisticated and disciplined enough today to do what is necessary to permit and build properties in a reasonable time frame, Meyer said. That's true even in tougher markets such as Southern California. According to the Jones Lang LaSalle report, 58 industrial properties are under construction in South- ern California. The outlook for 2014 and the next couple of years is one of steady growth in demand, modest growth in supply and increased asking prices for rents. Warehousing and distribution will become increasingly sophisticated, with more robotics and shorter delivery times, Meyer said. JOC Contact Bill Mongelluzzo at bmongelluzzo@joc.com and follow him at twitter.com/billmongelluzzo.

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