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The impact of rail investment and the rise of Intermodal facilities

The impact of rail investment and the rise of Intermodal facilities

David Skerrett, Director, Strategic Advisory at Colliers International discusses the increasing use of intermodal facilities in the logistics sector. 

According to the Federal Department of Infrastructure, Transport, Cities and Regional Development, the Federal Government will invest $100b over 10 years from 2019-2020 in road and rail infrastructure.

With respect to rail investment, the most significant national project is the 1700km Melbourne to Brisbane Inland Rail project which will deliver a high-capacity rail freight link between Melbourne and Brisbane.

The Federal Government has committed $9.3b to the project which is to be delivered by the Australian Rail Track Corporation (ARTC). The 2019-2020 Federal budget committed some $44m in funding to support business cases for intermodal facilities in Victoria and Queensland. This underlines the importance of intermodal terminals in supporting Inland Rail.

The delivery of Inland Rail will provide an essential freight gateway to allow key markets to have greater access to and from major ports along the eastern seaboard. This will significantly reduce supply chain costs. In turn, the rise of new intermodal facilities (in addition to the expansion of existing intermodal facilities) will act as the freight doors to unlock much of the operational benefit of this rail investment.

An intermodal facility is broadly defined as any site or facility along a supply chain that contributes to the transfer of goods from one mode of transport to another. The most common form may be the transfer from road to rail, or rail to port as a transfer point. Intermodal facilities or hubs are increasingly providing broader functions including storage, packing, distribution and value-added services. Some intermodal facilities may also provide multi-modal options (more than two freight options) at a single location.

Within capital city metropolitan markets, the increased dominance of major intermodal facilities, for example Moorebank in Sydney, Acacia Ridge in Brisbane and Dynon in Melbourne, is likely to place further demand and drive upward pressure on industrial land values in and around these intermodal hubs. Over the medium to long term, we consider that access to intermodal facilities will become a “must have” instead of a “nice to have” component in the investment decisions of operators, particularly those who have a direct logistics or distribution requirement within the major population centre in which they are located. This change may also see a shift away from metropolitan locations for some industrial users who do not have a significant distribution function (for example manufacturing for international export markets) of which could potentially locate in outer metropolitan or regional centres (with intermodal rail access) where there may be more affordable industrial land at scale.

Regional centres, including those that have a strong or developing agricultural, manufacturing or processing focus are likely to benefit greatly from the development of regional intermodal facilities. Benefits will be derived from an improvement in regional supply chains, assisting producers, processors and manufacturers gaining better access and reduced freight costs to deliver products to key markets. For example, in the case of a road-to-rail intermodal facility, this may allow for bulk goods and containerised freight to be loaded in-situ and rail freighted directly to major ports, reducing road freight costs and potential double handling. In addition, investment in regional intermodal facilities may also have significant flow on benefits to the broader economy and Governments. These benefits may include, increases in regional employment, a reduction in heavy vehicle demand on intra and interstate road networks (reducing maintenance costs), a reduced risk of road-based fatalities (by taking freight off roads) and potential environmental benefits by reducing emissions.

Our view is that concentrated investment in rail, from Federal and some State Governments, is likely to have far reaching benefits across a number of sectors within the Australian economy. We anticipate that supply chain benefits alone will drive demand for the co-location of industrial activities in proximity or with access to intermodal facilities. We consider that these co-locational benefits will increasingly become a key requirement influencing the decision-making processes of major industrial operators over the medium to long term.

Want to find out more? You can speak to the team at MEGATRANS2020 – Colliers International will be exhibiting from 1-3 April at the Melbourne Convention and Exhibition Centre. JOIN THEM HERE