Finding the right location for a terminal requires real estate insight
July 23, 2018
There are phases in a trucking company’s life when it needs to look for a new address at which to settle. It might be at start-up, when the basement of your home is no longer big enough, and you need a real place of business.
Or, you decide to downsize the scope of your operations and need to manage the extra space no longer required. Or maybe things are going so well that you need to open a new terminal. Regardless of the reasons, real estate dealings in trucking present their own challenges because of the industry’s unique requirements.
How do you know it’s time to move into something bigger or smaller? Unfortunately, there is no such thing as a magic ratio of “this number of trucks and employees requires this many square feet.”
Like many other situations in life, you realize that you might have a problem when an issue starts to negatively impact your operations.
Herman Fallick is president and CEO of CSA Transportation, and opened a new terminal in Surrey, B.C., two years ago and the construction of another one is underway in Calgary, Alta. To him, it’s simply a matter of volume.
“I wished it was more scientific but it’s not. It’s just a matter of realizing that on Monday morning you’ve got 10 trucks coming in and you can’t possibly unload them all on the floor,” Fallick says. “At some point it’s just choked, you need to expand and get additional space.”
Doug Munro, owner and president of Maritime-Ontario, also recently opened a new terminal in Surrey and built an $18.5-million hub in Moncton, N.B., about four years ago. He comes to a similar conclusion.
“Usually in our case, the tipping point is one of capacity. It’s interesting because we usually pass the tipping point and we realize that either freight volumes are a lot bigger or growing more and the facility is just too small, that type of situation.”
Shopping wish list
Whether you intend to rent or build, you need a suitable location that’s close to a major highway network, close to your major customers, and maybe even close to emergency services to lower insurance premiums. Proximity to rail yards is another advantage if doing intermodal.
Convenience for employees also needs to be taken into account, especially in a staff shortage context. Will the new place be too long of a commute for them? Is there public transit available?
For its new Calgary facility, CSA Transportation picked a location that was close to its current one.
“Primarily because the employees are long-term employees and they all reside generally around the terminal. So we didn’t want to go too far away from where people live. In Calgary, that was a big determining factor,” Fallick says.
Hours-of-service and the upcoming electronic logging device (ELD) mandate in Canada are another factor to consider. Your trucks will always need to come back to their home base, so you need to make sure that lower land cost didn’t take you so far into the outskirts that it can jeopardize your drivers’ operations.
The same logic applies to traffic conditions, according to Munro: “Even if you had a good piece of land in the east end of Toronto that was at a lower price, it wouldn’t be suitable because the trucks can’t be tied up in a traffic jam on the 401 for an hour or two. Now everything is so important with these hours-of-service regulations and electronic logs that have come into place in the U.S. and that are going to come in Canada.”
Once you’ve determined that you need a new site, finding an existing facility to buy or rent that suits your needs can be more complicated than it seems because, in terms of real estate, the trucking business is unique. It generally doesn’t require a huge building to operate in, but requires a lot of land to park its trucks and trailers and to allow these long vehicles to maneuver. Such a set-up is highly uncommon and hard to find, as people usually try to optimize any piece of industrial land by building the biggest warehouse or manufacturing plant possible on a given lot.
That means you may need to look for a place that was already used for trucking or closely related operations, and that’s exactly what CSA did for its Etobicoke, Ont., head office which used to be operated by a cylinder gas distribution company.
“If you find a company that did some kind of distribution in the past, where they had multiple trucks themselves, even if it was only for local deliveries, those are the types of facilities that might work for you,” Fallick says, adding that you still need to be ready to do some renovations to adapt the new facility to your own needs.
Maritime-Ontario was also lucky to put its hands on a Surrey location – 16.4 acres and 78 cross-dock doors – that used to be operated by FedEx, thus was trucking-friendly.
Renting space in a facility already occupied by a trucking company that has more than it needs can also be an interesting option that doesn’t require a major and long-term capital commitment or site maintenance expenses. Such a scenario can be a good fit as the location is already configured for trucking operations.
Headquartered in Plessisville, Que., Groupe Boutin recently decided to close its LTL division. The company now has office and yard space to rent in the Montreal and Quebec areas as a result of its downsizing. President Bernard Boutin thinks such collocation with tenants is a good way to optimize his assets while still maintaining ownership of the facilities in anticipation of future growth.
“The yard spaces are rented at a monthly fee per space, plus an annual electricity fee for the winter time,” Boutin says.
Building your own
Depending on what your needs are, you may decide to build from scratch and occupy your own land and building.
“We need a lot of yard space for turning, for parking, and storing the trailers once they’re empty. It’s almost impossible to go find something off the shelf unless you build it yourself or you’re lucky enough to find a traditional truck terminal,” says Fallick.
Some municipalities don’t welcome trucking companies, as their buildings tend to occupy only a small percentage of the land. And since municipalities make money on property taxes that are usually based on a building’s value, a small building on a large piece of land isn’t appealing to many of them. Some bylaws may even exist that require a minimum percentage of building footprint on the piece of land. Along with zoning bylaws and applicable levies, that’s one of the first things you need to check with the municipality before selecting a precise location where to build.
“That’s another issue, especially in Quebec, in Montreal. Even if they (buyers) can find enough land, a lot of times the municipalities don’t want to have a building on it that’s only got 10% or 15% coverage, like a dock terminal,” says Munro. Luckily, he adds: “There are some other markets where that’s not an issue. Like in the Maritimes, in Halifax, in Moncton, they don’t have those restrictions, nor in Alberta. It kind of depends on the jurisdiction.”
You also want to make sure that, beyond its square footage, the lot you intend to buy and settle on is the right shape.
“In our case, we try to find a rectangular piece. We’re usually looking for about 800 or 900 feet in width if we can, and then long,” says Maritime-Ontario’s president. “If you get into irregular shaped pieces of land, they’re not as good because you can’t optimize the trailer parking as well.”
Munro also points out that the lot you choose should be large enough to allow for expansion. As a rule of thumb, he says his company generally determines the size it currently needs, then buys double or triple that size.
But buying the land is just the start.
“The land is probably one of the lowest costs. We have to strip the top soil off and then put in the granular base and compact it. And then there’s fencing and entrances, drainage. All of those things that go into the actual design and construction of the site,” Munro emphasizes.
In addition to possible municipal reluctances, you also need to find a financing source that will accept your “small building on a big lot” set-up.
“When you get to your bankers for the money and such, they look at the footprint on a big piece of land and the ratios and stuff,” Fallick says.
And remember that available land is not necessarily land you can build on, as Maritime-Ontario found out while shopping for its Atlantic location in Moncton.
“Typically, if there is any standing water on it for wildlife, they won’t allow development,” Munro explains.
Availability of utility services also needs to be examined when starting from scratch, says Peter Garrigan, managing director, industrial practice group for the real estate agency Colliers International in Toronto.
“When you purchase a site, the municipality would typically tell you it is serviced or there is servicing at this location and you would be responsible to bring that servicing into your site and you’d have consultants supplying you with quotes on pricing on how to get that there,” he says.
Harmony with the neighbors is another key point you want to take care of when selecting a location.
“If you’re an owner-occupier, where you’re looking for land that you’re going to build your own facility on, and you know that you create some sort of noise or upset any neighbor, you have to be cautious of that. You have to do your due diligence – there are bylaws around that when you go to build a building in an industrial park that’s close to a neighboring residential area or school or whatever it may be,” reminds Colliers’ Garrigan.
As an example, CSA Transportation had to build walls at its expenses in Fontana, Calif., as the municipality didn’t want to see trucks parked in the yard.
“Even though they were welcoming to trucking companies, they did have stipulations as to what you could build, how it could look,” says Fallick.
Fellow citizens could also complain about the truck traffic you generate. Munro gives the example of the Halterm marine terminal in Halifax, N.S.
“In order to get to the Halterm, the trucks have to go right through downtown Halifax on Water Street or Barrington and that’s the tourist area,” he says, underlining that there is no alternate route for these trucks.
“When we’re buying land and locating, we try to be very aware of that, try to keep it in industrial areas away from residential areas, where we’re less likely to have any of those issues,” Munro says. That’s why Maritime-Ontario’s Moncton terminal is right off the Trans-Canada Highway where there’s no residential area nearby.