HUB OF ACTIVITY

Years in the making, the International Inland Port of Dallas thrives as its profile rises



It was the late 1990s, and Dallas-Fort Worth developer Mike Rader had a vision for a vast expanse of land south of Interstate 20 flanked by Interstate 35 on the west and Interstate 45 on the east. His vision, for an intermodal freight transport terminal owned and operated by a major railroad, set the stage for what is today one of the highest-profile industrial developments in the country.

Known as the International Inland Port of Dallas (IIPOD), the 7,500-acre region contains a Union Pacific intermodal facility and ample, affordable land flanked by three interstate highways. The inland port has attracted the nation’s biggest industrial developers along with many of the country’s most recognizable Fortune 500 companies, including Amazon, FedEx, Kohl’s, and Whirlpool.

“It’s starting to take off and prove itself,” Rader says from his nondescript beige metal office building along Wintergreen Road in Hutchins where maps of his and his partners’ land holdings adorn a conference room table and walls.

Construction of massive warehouses — some exceeding 1 million square feet — have become routine over the past three years in the IIPOD.

A SLOW START
It wasn’t always this way. The inland port coalesced slowly, much to the chagrin of developers and economic development officials in the five-city region comprising its boundaries: Dallas, Lancaster, Hutchins, Wilmer and Ferris. 

Mike RaderRader initially wooed Burlington Northern to build and operate an intermodal facility in southern Dallas County, but the deal fell through days before papers were to be signed when BN and Santa Fe Railway announced a merger. It became a moot point because Santa Fe already had a Fort Worth intermodal that the merged railway would use. That intermodal would later become an economic driver for Ross Perot Jr.’s massive Hillwood industrial development at Fort Worth Alliance Airport.

Over in South Dallas, meanwhile, Rader started over from scratch, this time with Union Pacific. It would take him seven years to convince UP to build an intermodal terminal in the inland port. The facility, which spans a portion of Wilmer and Hutchins, opened in 2005.

Around that time, FedEx — attracted by the confluence of interstates — located a massive ground transportation distribution center in the area.

“Because FedEx is such a leader in logistics, it was a real endorsement of us as a location for logistics, warehousing and distribution,” says Guy Brown, economic development director in Hutchins, where FedEx is located and whose entire city limits is within the port’s boundaries.

Soon thereafter, a California developer came calling. The Allen Group was convinced intermodals were the future driver of warehouse growth, but its Bakersfield industrial park was too close to the Port of Los Angeles to interest railroads in building an intermodal there. When it learned of UP’s plans in Dallas County, it bought land near the intermodal, says Richard Allen, CEO of The Allen Group.

Between 2005 and 2006, The Allen Group bought approximately 6,000 acres of raw land in southern Dallas County.

“We understood that the land in and around these intermodals was considered ocean front property,” says Allen, whose development firm would later be selected to develop an intermodal and control development around it on behalf of BNSF in Kansas City. 

By 2008, there was approximately 5 million square feet of industrial space either built, under construction, or planned in the inland port with only about 500,000 square feet actually occupied, according to Dallas Mayor Mike Rawlings.

Then the Great Recession intervened in The Allen Group’s grand 6,000-acre vision — which it dubbed the Dallas Logistics Hub — and the group sought out bankruptcy protection. The developer sold the two buildings it had developed and about 1,700 acres before successfully emerging from bankruptcy in 2012.

GAINING MOMENTUM
Today, The Allen Group controls about 1,300 to 1,400 acres of raw land within the inland port’s boundaries and has been selling off parcels to developers. It remains bullish on the inland port’s future.

“It isn’t just the intermodal that’s driving development,” Allen says, “it’s also the interstate highway system. That region is literally surrounded by highways. That was a huge area of vacant land; it was just a perfect spot. Right now that’s the hottest industrial market in the Metroplex.”

Rader, who—with partners—controls about 4,000 acres in the IIPOD, including some land purchased from The Allen Group, points to a Stream Realty study as an indication of the market’s strength.

The Dallas-Fort Worth region delivered 26.8 million square feet of industrial space in 2017, according to the Stream Realty report, which used CoStar Realty Information Inc. data. The Inland Empire in Southern California was second, delivering 20.2 million square feet and Chicago was third with 19.7 MSF.

Today, Rawlings notes that, according to a recent analysis, more than 32 million square feet of industrial space has been built, is under construction, or is planned in the inland port with over 24 million square feet occupied or under construction with an occupant designated. 

The developing port has become a welcome tax base for the cities that occupy its boundaries: Dallas, Lancaster, Hutchins, Wilmer, and Ferris.

“In 2007, the taxable value of real property in the Dallas-portion of the inland port was approximately $19 million,” Rawlings said. “By 2015, the taxable value of real property in the Dallas-portion of the Inland Port had grown to over $135 million. In terms of job creation, the inland port now has over 3,000 direct jobs.”

Duke, an Indianapolis-based publicly traded real estate investment trust (REIT) and S&P 500 company (NYSE: DRE), is one of the most prolific developers in the IIPOD, having developed six buildings totaling 4.5 million square feet – with 2 million square feet of that in the last two years. It owns all but one of the buildings it developed there.

“Starting about 10 years ago, the South Dallas submarket started to gain momentum as the new frontier for industrial development,” says Jeff Thornton, Duke Realty’s regional senior vice president. “Ten years ago, you saw meaningful development. Now, fast-forward 10 years, and you’ve got half the developers in town building down there. It’s the most active submarket with about 12 million square feet of speculative space under construction or on the ground.”

When looking at all industrial markets in Dallas-Fort Worth, those to the north, west, and northwest of Dallas were first to develop and are transitioning to infill markets, says Thornton. South Dallas, with its abundant land, intermodal facility, confluence of interstates, and available labor pool holds the advantage for future industrial activity in North Texas, he says.

“As an industrial developer and someone who has a vested interest in that area of town, it’s been great to see the city of Dallas and the Dallas Regional Chamber get behind the Southern Sector,” Thornton says. “Mayor Rawlings’ push with his Grow South initiative and the chamber’s attention to promoting that area of town really reinforces the viability of the area and has helped fueled the growth.”

As mayor, Rawlings initiated the Grow South strategy in 2012 to improve economic conditions in the southern sector of Dallas, which has been plagued by poverty and high unemployment. The initiative lays out a growth strategy for eight focus areas, with one of the focus areas being the education corridor/inland port. 

Since 2006, the city of Dallas has invested over $40 million in bond funds for infrastructure to enable development on the Dallas portion. The city also collaborated and coordinated with county, state, and federal partners for roughly $30 million more in infrastructure funding. It has used incentives that range from tax abatements to grants, to leverage private investment and job creation.

“For the city of Dallas, we’re looking to continue to capitalize on robust market conditions by using strategic investments in infrastructure and incentives to support development of the remaining parcels of land in the Dallas portion of the Inland Port,” Rawlings says. “We see opportunities to step up our efforts in partnering with employers, nonprofits, local colleges, and other governmental entities such as the Dallas Independent School District and the Dallas County Community College District to support the continued creation of quality employment opportunities for southern Dallas residents through workforce development and job training initiatives.”

One of the city of Dallas’s recent initiatives involved a $1.3 million grant for street construction and a 10-year, 90-percent real property tax abatement to facilitate the construction of the 600,000-square-foot LogistiCenter. Developed by Reno, Nevada-based Dermody and completed in 2017, LogistiCenter offers the potential expansion of up to 1.1 million square feet or a second phase with a separate building of 447,000 square feet. It’s just one of a handful of recent construction projects in the port.

MANUFACTURING PUSH
Although the inland port, to date, has largely been focused on massive distribution centers served by rail, truck, or both, the region has expressed interest in attracting manufacturing plants. 

In June, the city of Dallas announced a major coup: commercial online printer Vistaprint will invest $50 million to establish a manufacturing plant in the IIPOD that will create more than 600 high-paying jobs over a three- to four-year span and 100 annual seasonal jobs. 

Vistaprint is the largest business of Netherlands-based printing conglomerate Cimpress, which employs more than 11,000 and operates 20 portfolio brands around the world that serve small businesses with customized printing products. 

“We need more manufacturing companies coming in, and this might just be the start of manufacturers coming into the inland port,” says Tennell Atkins, Dallas City Council member, whose district will include Vistaprint.

Atkins says he’s been a longtime supporter of the inland port, including using economic incentives to attract companies and developers, as he sees the port as a major jobs driver. 

The city approved $1.7 million in incentives for Vistaprint with an incentives package that includes a tax abatement and workforce development funds. Although Vistaprint is in the city of Dallas, the plant is near the city limits of Lancaster, which expects its labor force to benefit from the jobs.

Shane Shepard, economic development director for Lancaster, says e-commerce operations such as Vistaprint and Wayfair.com are gaining a foothold in the port. Cities like e-commerce operations because municipalities are able to collect sales tax on the transactions.

IMPROVING THE INFRASTRUCTURE
The five cities within the inland port, along with Dallas County, are making a variety of infrastructure improvements to make still-undeveloped land more attractive. 

The Loop 9 project, beginning with six lanes of frontage roads, is expected to begin soon and will connect I-45 to I-35, running through portions of Dallas and Ellis counties. A variety of other road, sewer, and water projects are planned or in the works. 

Lancaster, meanwhile, is building a $2.5 million terminal building at its airport—often the first impression for executives coming into the port for tours. Construction began in the spring and is scheduled to be completed by the end of 2019. The airport’s masterplan includes an eventual extension of the runway from 5,500 feet to 8,000 feet.

ENJOYING THE FRUITS
David Miracle, executive director of economic development for the city of Wilmer, which still has thousands of undeveloped acreage available, says brokers, site consultants, the governor’s office, the Dallas Regional Chamber, and others have been calling and providing steady leads.

“Sometimes it’s overwhelming — the number of projects that are looking at us,” Miracle says. “These industrial sites are some of the most looked-at properties in Texas and the United States. It’s one of the hottest markets out there. It’s exciting to have that much interest and activity.”

 


 

MAJOR DEVELOPERS OF THE INTERNATIONAL INLAND PORT OF DALLAS

THE ALLEN GROUP

San Diego-based Allen Group specializes in rail-served industrial developments, office, retail and mixed-use properties. The group currently owns about 1,400 acres in the Dallas Logistics Hub. The group developed two buildings that were later sold and is selling land to developers.

“I think it’s great that the Grow South initiative exists and that political minds have seen the light and see the advantages of developing land where there was higher unemployment and the availability of a labor force.” — Richard Allen, CEO and founder  

CORE5 INDUSTRIAL PARTNERS
Atlanta-based Core5 is a full-service real estate property company with expertise in development and acquisition of Class A inventory and build-to-suit industrial facilities.

A 754,000-square-foot building with 416,000 recently leased to VM Innovations.

“I think what really helped them in the location selection was the access to the freeway system being off of Interstates 45 and 20 and also the FedEx Ground that is only about 1.5 to 2 miles away from our property.” — John Leinbaugh, vice president, investments

DERMODY PROPERTIES
Reno, Nevada-based Dermody Properties is involved in industrial real estate investment, development, acquisition, and management. Phase 1 of the LogistiCenter in Dallas is a 626,439-square-foot distribution center expandable to 1.1 million square feet. If Phase 1 isn’t expanded, a Phase 2 building of 447,457 square feet will be developed. 

DUKE REALTY
Duke is an Indianapolis-based publicly traded REIT that owns 16 million square feet of industry properties in Dallas-Fort Worth. Duke has built six buildings in the inland port totaling 4.5 million square feet, with 2 million square feet of that in the last couple years.  Its tenants include American Standard, Unilever, Whirlpool, Shippers Warehouse, and WayFair.com.

“We can reach about a third of the U.S. population within a one-day truck drive from Dallas-Fort Worth.”  — Jeff Thornton, regional senior vice president

HILLWOOD
Fort Worth-based Hillwood is involved in all facets of industrial development, including land acquisition, master planning, building design, and construction. Developments include The Crossroads Trade Center (DeSoto) with three buildings totaling more than 4.5 million square feet; Commerce 20 Industrial Park with two buildings totaling over 1.1 million square feet; and Commerce 45 with two buildings totaling more than 1.5 million square feet. Hillwood developed the buildings occupied by Georgia-Pacific and Kohls. 

HINES
Houston-based developer Hines is a global real estate investment, development, and management firm with $111 billion in assets under management. The 125-acre development includes a 1.5 million-square- foot logistics park consisting of a 1 million-square-foot center, expandable to 1.5 million square feet. If Phase 1 isn’t expanded, a Phase 2 building of 450,000 square feet will be built. 

“We’ve seen a trend of regional distribution centers continuing to get bigger and tenant requirements continuing to grow. Part of that is driven by the onslaught of e-commerce-related users but also a reworking of supply chains to be more efficient.” — Connor Tamlyn, director

MAJESTIC REALTY CO.
Majestic Realty Co. is the largest privately owned industrial developer in the U.S.

Majestic has proposed buildings in SouthPoint: a 525,770-square-foot building for a single tenant and a 717,410-square-foot single-tenant building, both in the city of Hutchins.

PROLOGIS
Prologis Inc. is an owner, operator, and developer of industrial real estate around the world. Prologis Park 20/35 is located in Lancaster. Prologis has developed several build-to-suits in the inland port.

PRIME45 DEVELOPMENT 
Dallas-based Prime45’s Mike Rader brought the UP intermodal to the inland port and has been a key player in the inland port’s development. Prime45’s 4,000 acres is spread across several parks, including 3,000-acre Prime Pointe rail served by Union Pacific Railroad. 

“The whole inland port area is seeing a lot of growth, and we still have a lot of land available to be developed.” — Mike Rader, President

RIDGE PROPERTY TRUST
Ridge is the industrial development arm of Houston-based Transwestern Development Com. Development includes a build-to-suit for L’Oreal in 2013, and is 100 percent leased to the cosmetics maker. The facility and surrounding park were purchased by State Farm in 2014.  

SCANNELL PROPERTIES
The Indianapolis-based real estate development and investment company focuses on build-to-suit and speculative development in the U.S. and Canada, including Sunridge Business Park 2, a 715,520-square-foot spec building. It also did a 450,000-square-foot build-to-suit for Constellation-Biaggi and a 320,000 square-foot build to suit for Makita. 

TRAMMELL CROW CO.
Trammell Crow is one of the nation’s leading developers and investors in commercial real estate. Trammell Crow was one of the first and most prolific developers to put up warehouses in the Inland Port—before it had that moniker—with the first building going up in 2001. It has developed over 3 million square feet in the inland port, leasing some buildings and selling others.

“The product movement from Mexico to the East Coast has made the I-20/I-35 corridor one of the most important logistic centers in the country for most large distributors.  We see the IIPOD rivaling the Inland Empire Industrial Market over the next 10-20 years and want to continue to provide first-class facilities to meet the needs of the tidal wave of large companies attracted to the area.”  — Jack Marks, principal    

VANTRUST REAL ESTATE
Kansas City-based VanTrust Real Estate is a full-service real estate development company. DalParc I-20 Logistics development includes Building 1 — 920,275 square feet— amd Building 2 — 145,800 square feet. Both were completed in 2017. Two more buildings, totaling 1.37 million square feet are planned.