Class 1 railroad plans ongoing projects at intermodal facility which is near major shippers and new warehouse space.
BNSF, a unit of Berkshire Hathaway (NYSE: BRK.A), plans to add rail capacity at its Alliance Intermodal Facility as distribution and warehousing space in the Fort Worth market is anticipated to grow substantially.
As part of its previously announced capital spending plans, the largest U.S. railroad said it plans to spend $405 million in Texas this year, compared to $375 million spent in 2018. BNSF said over half of the 2019 funds will go to increasing capacity and train speeds in the state.
The projects include adding double track capacity between Alliance and the nearby Cleburne repair and maintenance yard. BNSF, which has undertaken expansion projects at Alliance since 2016, said the 1,200-acre facility is slated for ongoing expansion projects including new tracks, parking stalls and lift equipment.
Logistics companies, of course, are coming to where the shippers are. Hillwood, the site’s developer, said 1.5-million square feet of industrial space will be added to AllianceTexas by the end of 2019. That development comes in addition to a 1.2-million square-foot distribution center that Stanley Black & Decker (NYSE: SWK) plans to build in the region.
The growth in North Texas warehousing and distribution comes as record low warehouse vacancy continues in the U.S. The national vacancy rate is estimated to be around 4.3 percent, according to real estate research firm CBRE (NYSE: CBRE). By contrast, the Fort Worth market shows a vacancy rate of 11.6 percent according to SONAR (SONAR: WHVAC.FTW)
“Alliance proves that if you have a facility with room, (the shippers) will go there,” said an intermodal executive who was not authorized to speak on the record. The BNSF Alliance terminal is “a great facility with great service. There are not a lot of intermodal facilities that can expand right now.”
He added that Alliance provides the potential for intermodal service to further chip away at the trucking industry’s share of the Dallas market. Located 1,300 miles from Los Angeles and close to 1,000 from Chicago, Dallas has become an “inconvenient length of haul” for many truckload carriers due to hours-of-service limitations. The DAT Van Freight Rate Index for Los Angeles-to-Dallas (SONAR: DATVF.LAXDAL) remains at a seasonal low of $1.48 per mile.
“A lot of the truckload people who served Dallas were ‘running hot’ and they can’t run hot anymore, meaning it was supposed to take three days to get there, but they did it in two,” the executive said. “With intermodal, if you run it a second morning, you can get there as fast or faster than a truck going the legal speed limit.”
BNSF’s other projects in Texas include new siding and centralized traffic control on the Madill Subdivision north of Dallas. BNSF also said it will put new staging tracks at its Eagle Pass Border Gateway to handle growth into Mexico.