Transportation and logistics industries are vital to the megaregion’s economy
Speakers (from left to right):
Joe Ruddy: the chief operations officer for the Virginia International Terminals.
Matt Anderson: a commercial real estate broker in Richmond with Colliers International who specializes in the industrial sector.
Lang Williams: a commercial real estate broker in Colliers International’s Norfolk office who specializes in the industrial sector.
Bill Hudgins: senior development manager in Virginia for Panattoni Development, a California-based company that has developed warehouse projects for Amazon in Virginia and is doing more projects in the megaregion.
John Toler: CEO of Evergreen Enterprises, the South Richmond-based global home decor business that designs, manufactures and distributes more than 10,000 home decor, sports, and garden products and accessories to more than 15,000 retailers.
Transportation and logistics industries are an important part of the economy of the I-64 Innovation Corridor megaregion, according to speakers during a webinar in June.
The crown jewel of the logistics network is the Port of Virginia, which grew 25% in volume during 2021 and posted its most productive year despite global supply chain challenges from the Coronavirus pandemic.
The port, a leading international gateway to the U.S. market, has made or is in the process of making hundreds of millions of dollars in improvements and upgrades, including dredging the port’s channels to make it the deepest on the East Coast.
“We, at the Port of Virginia, are part of the overall logistics process,” said Joe Ruddy, the chief operations officer for the Virginia International Terminals, who is responsible for all operations at state-owned and leased marine terminal facilities in Norfolk, Portsmouth, Newport News, Richmond, and Front Royal.
“It's very important for us that we continue that collaboration because that allows us to grow and allows us to seek the investment monies,” Ruddy said during the Virtual Innovation Spotlight panel discussion on the growing transportation and logistics industries in Virginia.
The webinar, presented by RVA757 Connects, was held Tuesday June 7.
Also on the panel were Matt Anderson, a commercial real estate broker in Richmond with Colliers; Lang Williams, a commercial real estate broker in Colliers’ Norfolk office; Bill Hudgins, senior development manager in Virginia for Panattoni Development, a California-based company that has developed warehouse projects for Amazon in Virginia; and John Toler, CEO of Evergreen Enterprises, the South Richmond-based global home decor business that designs, manufactures and distributes more than 10,000 home decor, sports, and garden products and accessories to more than 15,000 retailers.
The Port of Virginia is an international trade gateway, Ruddy said, and is making significant investments to increase its business.
That includes deepening the commercial shipping channels from the Atlantic Ocean into the Norfolk Harbor to 55-feet deep and making it wide enough to safely accommodate two-way traffic of ultra-large container ships. These improvements will enable the Port to attract more cargo and increase efficiency at its terminals while providing new economic opportunities to the region, he said.
“We will be among the Western Hemisphere’s most modern, technologically-advanced and sophisticated gateways,” Ruddy said. “We have capacity for additional growth and we are looking at other significant port-centric investments.”
An increasing number of distribution centers and warehouses have been built or are being built throughout the megaregion, enabling retailers, logistic providers, and others like Evergreen Enterprises to distribute products that reach about 45% of the U.S. population within one day’s drive.
Overall activity for distribution centers is robust and diversified, said Anderson and Williams, both from Colliers.
In the past five years, the number of warehouse and distribution projects in the Richmond region has grown substantially.
“We’ve seen a big spike in the overall number of square feet under construction each year,” Anderson said. “We’ve got some significantly larger projects than we've ever seen in years past.”
The Richmond region saw 14% rent growth in warehouse space in 2021 and a 13.5% growth in the first quarter of 2022. “There's a lot of speculation that rents will continue to grow at significantly higher levels for the foreseeable future, based on the overall demand from end users,” Anderson said.
While a record 7.5% of warehouse and distribution center inventory space is under construction, the region also is seeing shrinking availability of space with limited amounts of land zoned for warehouses and distribution centers.
“Due to transportation savings through the Port and through I-64 and I-95 and the availability of labor, we continue to attract significant investment projects and hopefully that will continue for years to come,” Anderson said.
But that shrinking availability of sites poses challenges for future growth, Anderson and Williams said.
“Just about every site that we were marketing has been absorbed, acquired or is under development. And one of the challenges may be that there's not going to be enough to build to handle the increase in freight so that will force the freight to go potentially to other states,” Williams said.
The Hampton Roads region has experienced more than 5 million square feet of net absorption in warehouse and distribution space in 2021 – and 10.4 million square feet in the last five years. With the number of projects under construction or announced, the region is expected to add nearly 12 million square feet of space from 2021 to 2024.
The vacancy rate for warehouse and distribution centers in Hampton Roads is at an all-time low of 0.9%, Williams said.
“But most of the demand that we see going forward is going to be anybody but Amazon. I think that's healthy with third party logistics firms serving everybody. We're seeing a lot of different demand factors not just Amazon which is healthy for us,” Williams said.
Hudgins, with Panattoni Development, said there needs to be a change in the paradigm by taking what might have been considered a disadvantage for the Port of Virginia and flipping it around to make it into an advantage.
“There's a unique Virginia supply chain opportunity,” Hudgins said. “I think it gives us a grand opportunity to understand why the Virginia opportunity is so much more than Norfolk and more than just Richmond. The opportunity with the supply chain really stretches from one end of Virginia to the other.”
In the past, some thought that the 90-miles from the Port of Virginia to I-95 was seen as a disadvantage when compared with ports in Savannah, Ga., and Newark, N.J.
Hudgins wants to flip that notion. Today, most of that freight that comes off that terminal in New Jersey goes inland about 2 ½ hours to Central Pennsylvania. It takes about three hours to go from the Port in Savannah to the Atlanta area.
If the thinking was the same for Virginia, it opens up the entire state for distribution center development, he said.
Toler, the CEO of Evergreen Enterprises, said the company plans to invest money into high density racking solutions and other automation solutions rather than just buy or rent more warehouse space.
“Storage is a big problem. But the labor piece also is a big problem. So it is all about automation and high density storage,” Toler said.
Evergreen Enterprises lands about 3,000 containers annually in Norfolk.
Most of those containers are then sent up the James River to the Port of Richmond, he said, which costs a little more. But that cost is cheaper than shipping it from Hampton Roads via trucks to Richmond.
The company is a big user of the Port of Richmond, but “we would use it more if we could get more people to use it which would increase the frequency of service,” he said. “The critical stuff, the really time sensitive stuff, we bring into Norfolk because it certainly would just get here quicker.”
Last year’s global supply-chain problems caused jammed cargo at U.S. ports. But that mostly happened on the West Coast, Toler said.
“It was quite a challenging year,” Toler said. “It was a big problem and it's getting much better. We are very fortunate to be located here in Richmond and working with Norfolk port and not with the one in Long Beach, California.