Aftermarket

Report: There's a Bright Side of the Real Estate Bust for Truckers

February 18, 2009

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The crash in the U.S. real estate market, including declining property values for commercial properties, is turning into an unlikely boon for the trucking industry
, reports Traffic World Associate Editor John Gallagher in a Special Report titled "Terminal Buy Time."

"The recent collapse of commercial real estate has provided a rare opportunity for companies that previously had a hard time finding space for terminals," said Traffic World Editor-in-Chief Paul Page. "It's the flip side of the real estate crash, at least for trucking companies that have the cash to take advantage."

Not since Consolidated Freightways unloaded 280 terminals following its 2002 shutdown have as many quality properties come up for sale, Gallagher writes. And carriers with strong balance sheets and plenty of cash are reveling in the best real estate market in years for expanding and upgrading their LTL (less-than-truckload lot) terminal networks.

Broker Will McFarlin of Burr & Temkin, a real estate firm specializing in the transportation industry, concurs. "This is the biggest high point as far as properties being on the market. There's still a lot of pressure on the industry and potential for more closures this year. I don't think they've hit their peak yet."

Analysts tracking such data don't think so either, writes Gallagher. John Larkin with Stifel Nicolaus estimated a 40 percent year-over-year decline in trucking company failures during the fourth quarter of 2008, mainly due to high fuel costs and weak demand. An estimated 130,000-140,000 trucks were removed from service during the year.

However, Gallagher notes that terminal network realignments and operation downsizings, more so than bankruptcies, are resulting in bigger hits to the real estate market in the LTL sector. In November, Con-way Freight stripped 40 facilities out of its 303-terminal network in a move estimated at saving the carrier $30-$40 million and eliminating 124,000 miles per day from its system. The company plans to sublease 30 terminals it was leasing and sell outright the other 10, Gallagher writes.

Calling this "a trend that's been years in the making -- and built momentum as the freight economy plummeted and the credit markets tightened," Gallagher reports that saving money with more efficient terminal operations has moved beyond a means of competing to a key to surviving.

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