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Keeping their cool: Industry insiders say Bayonne Bridge delays won't slow growth of refrigerated warehouses

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Gerard von Dohlen is president of Newark Refrigerated Warehouse Company
in Port Newark.
Gerard von Dohlen is president of Newark Refrigerated Warehouse Company in Port Newark. - ()

If you ask Gerard von Dohlen, the freight already is here.

And the freezers already are full.

So despite any fears about delays in the $1.3 billion raising of the Bayonne Bridge — a project that will allow larger ships to call on the Port Newark-Elizabeth Marine Terminal — von Dohlen doesn't necessarily feel his business will be impacted.

Von Dohlen, the president of Port Newark Refrigerated Warehouse in Newark, is all in.

In fact, he’s building out to take advantage of the booming business that’s already here.

“I don’t think you’d delay your own (construction) because there will still be plenty of freight around to keep people happy,” von Dohlen said. “I’m spending $20 million on a (new) building — if I’m wrong about this, I should be embarrassed.”

And if he’s right — well, his company will be in prime position to handle ships triple the current size.

The Bayonne Bridge project, which is being overseen by the Port Authority of New York and New Jersey, ultimately will allow the state’s shipping terminals to take full advantage of the larger ships that will come through the $5.2 billion widening of the Panama Canal.

Von Dohlen isn’t deterred by the Port Authority’s announcement this month that the raising of the Bayonne Bridge, from 151 feet to 215 feet, will now be delayed by more than a year due to construction.

Whether they get here in 2017 or later, ships nearly triple in size, he said, mean triple the amount of food imports that will need to be refrigerated.

So he’s moving forward with plans to construct a third cold storage warehouse in Newark.

“We are so (eager) to build here,” von Dohlen said. “A lot of refrigerated warehouses will be built as close to the port as possible over the next 10 years.”

Accurate statistics on cold storage warehousing in New Jersey are hard to come by — but total industry growth has increased 20 percent since 2012, according to the 2014 International Association of Refrigerated Warehouses’ Global Cold Storage Capacity Report.

“The prevailing view of everyone at the port is that our trade will grow 3 to 4 percent a year — the natural growth rate in world trade — plus another 4 to 5 percent for the effects of the Panama Canal expansion,” von Dohlen said.

— — —

Cold storage is hot — and von Dohlen isn’t the only one who thinks so.

Michele Brown, the former head of the state Economic Development Authority and current CEO and president of Choose New Jersey, has seen the growth firsthand.

“We have a number of cold storage companies that are expanding their presence in New Jersey,” she said.

It’s a popular idea — one that has kept Hollister Construction Services, a construction management firm headquartered in Parsippany, as busy as ever.

Going East: How Newark is taking market share from California
Recent International Longshore and Warehouse Union (ILWU) strikes at West Coast ports — such as Long Beach and Los Angeles, the two biggest container ports in the U.S. — have meant big business for the East.
“Every time it’s happened, the West Coast ports have lost market share,” said Arash Azadegan, associate professor of supply chain management at Rutgers University. “Everyone shifted to the East Coast ports and not all of them went back after the strikes resolved. There was an assurance of delivery and performance.”
Anne Strauss-Wieder said this was phenomenal practice for the post-Panamax party.
“We are going to have higher volumes coming in. The area got a taste for it with the West Coast diversions,” said Strauss-Wieder, a Westfield-based logistics consultant. “We got additional surges pretty darn fast, but the good news is, it told us what needed to be done to handle bigger ships on a growing basis.”
Bethann Rooney said the Port Authority of New York and New Jersey did see much of that increase, but not to expect it to last.
“We’ve seen on average about 2 to 4 percent of increased cargo on an annual basis,” Rooney said. “This year, because of the diversions from the West Coast, we are looking more at 11 to 12 percent — but we don’t anticipate being able to sustain that.”
John Nardi, president of New York Shipping Association, isn’t so sure.
“Industry experts believe up to 10 percent of import and export cargo from East Asia can shift to the East Coast from the West Coast by 2020,” he said.
Gerard von Dohlen sees it with his customers every day.
“Retailers are anxious to divert their freight away from the West Coast and its associated labor problems,” he said.

“The industry has been on such a rise that we get calls regularly from companies looking for large scale refrigerated or production warehousing,” said Andrew Goetting, business development manager at Hollister. “We’ve been working over the last couple years with many companies that are developing this space and occupying previously developed space around the port areas.”

It’s so common that Hollister — which recently completed two large-scale refrigerated facilities this month for large food importers and distributors in Union County — has essentially built a food-based practice within its business.

“We are building new ground-up refrigerated warehouses, but we are also building box-in-box facilities where you take an existing building and build a refrigerated building inside it,” said David Williams, project executive at Hollister. “This can be an economical version, since we can build one of those in half the time.”

Frank Giantomasi, a member of Chiesa Shahinian & Giantomasi’s real estate, development and land use practice, said business is booming so much now that a box-in-box facility may also be the only option soon.

“Land is being gobbled up at an incredible pace around the port,” Giantomasi said. “Five years ago, we did not have the square footage of cold storage in the Newark area that we do today. … (Now) it’s selling for $1 million an acre.”

— — —

Delays caused by the bridge raising falling behind schedule are just that — delays.

At least that’s what many industry officials think.

And here’s one thing they all agree on: It’s a business that cannot leave New Jersey for one simple reason: It’s where the people are.

The Port Authority — the operator of the largest port on the East Coast — serves more than 35 percent of the U.S. population, according to the New York Shipping Association.

And all of those people — 20 million of which are within a two-mile drive of the port — need to eat.

“Within 50 miles of Newark, from bodegas to supermarkets to wholesalers to restaurants, is just about the densest place in the U.S. to distribute food,” Giantomasi said.

Brown agreed.

Congestion concerns: Will more ship traffic mean more road traffic?
Should New Jersey expect its highways to be even more gridlocked than usual with the arrival of so-called post-Panamax deliveries?
Businesses — such as Atalanta Corp., a $970 million food import and distribution family business in Elizabeth — are concerned.
“New Jersey will become a more important port than it already is. …  (And) the port is already pretty congested now — when there are bigger ships with more containers, it could mean a bigger bottleneck,” said Andy Gellert, president of Atalanta Corp. “How will (the state) handle the extra traffic? Is (the port) making room for the containers? … Is it going to be a bigger hassle than it already is today?
Gerard von Dohlen, president of Port Newark Refrigerated Warehouse, welcomes the increase but also is interested in those answers.
“Port Newark averages 5,100 containers moved per ship — the largest in the country,” he said. “If you don’t have the gate capacity when you put the container on the ground, there will be an even worse congestion problem.”
According to the Port Authority of New York and New Jersey, the number of vehicles that passed through the port indeed rose 17.5 percent between August 2014 and August of this year — however, the number of containers shipped via the Port Authority’s ExpressRail train system also grew 5.9 percent compared with last year.
“We have more than 1,000 miles of freight lines,” said Michele Brown, CEO of Choose New Jersey, the state’s nonprofit marketing organization. “If you have product coming into the ports and immediately want it on freights, you have that option. … The beauty of being in this state is the number of different options available to you to get to a large audience in a short amount of time.”
If you still want to take the New Jersey Turnpike, Brown said, that has been improved, too.
“In the last two years, all of the improvements to the Turnpike were finalized and both the north and southbound lanes were doubled in the central part of the state where a majority of logistics and distribution businesses are,” Brown said. “That made an incredible difference to those businesses because sitting on the Turnpike for two hours with cargo containers is enormously expensive. Now, you can take the Turnpike and be fairly confident that you’re not going to run into the same kind of traffic.”
Still, industry experts say, more can be done.
“What do we need to do to efficiently handle these vessels? Labor, management, trucking, rail, every agency’s involvement,” said Anne Strauss-Wieder, a Westfield-based logistics consultant.
In fact, the agencies have already proven that they can work together to accomplish such tasks.
“Everyone worked so well together in the aftermath of Superstorm Sandy to get the Port quickly back online,” Strauss-Wieder said.
Better information sharing and management is definitely the way to go, said Rutgers University professor Arash Azadegan.
“We need to consider the new integrated and smart supply chain. We are already using GPS, electronic data interchange, and real-time location systems. Control towers and logistics technology platforms are also becoming commonplace. But not everyone is using them,” he said. “These are all technologies that suppliers can use to help minimize their losses while infrastructure upgrades are being made.”
It will also mean extra hours and employees at the terminals, von Dohlen said.
“Terminals around the rest of the world operate 24/7 — we’re one of the only ones that operates in shifts,” von Dohlen said. “When we make that transition, we will spread traffic over a longer number of hours and reduce peak impact. Terminals simply don’t have enough room to park those containers — we’re being forced to modernize.”

“If you’re looking to do same-day delivery service to either Manhattan or Philadelphia, it only makes sense to locate in New Jersey,” she said.

Anne Strauss-Wieder, principal of A. Strauss-Wieder — a supply chain logistics consultancy in Westfield — said the region’s demographics continue to influence just how much gets delivered to cold storage warehouses and when.

“There is always a pressure on the supply chain to be as effective and expeditious as possible at the lowest possible cost,” she said. “One of the ways that the supply chain can do that is by lowering the cost per container — fit more on a vessel, lower the cost.”

Arash Azadegan — associate professor of supply chain management at Rutgers University — said making way for larger ships also will open up more opportunities for shipping companies to capitalize from cold storage warehouses.

“There is a huge difference in price for cold storage shipments versus dry storage,” Azadegan said. “They carry a lot more margin.”

As for the delay of the Bayonne Bridge resulting in a loss of such profits to competing ports in other states, don’t sweat it, von Dohlen said.

“Big ships can’t afford to give up a third of their East Coast market,” von Dohlen said. “They won’t schedule major ships until after the port is able.”

Which brings up a good question — one that is often misunderstood.

“On the waterfront in Manhattan, the Queen Mary looks like a toy boat in a bathtub,” Brown said. “Does this mean that we are going to have 100 times more product coming in? Probably not — what we will have is a whole bunch of product arriving at the same time.”

The thought of managing such an influx of imports is what spurred the Port Authority to invest more than $2.2 billion over the last few years into the terminal, roadway and rail infrastructure, as well as new equipment such as automated cranes.

— — —

No one disputes that bigger ships will be here eventually. Their impact, however, is of some debate.

“The infrastructure that we are building and that our terminal operators are investing in is designed to efficiently handle the freight we already have and what we anticipate — but we are not anticipating huge new cargo shipments simply because we’ve built all this infrastructure,” said Bethann Rooney, assistant director of the Port Commerce Department at the Port Authority.

And the consolidation of shipments makes some industry insiders — such as Preferred Freezer Services in Chatham, one of the largest public refrigerated warehousing companies in the world — believe the Bayonne Bridge and the Panama Canal expansions won’t affect the cold storage industry much at all.

“We think it’s going to be a single-digit increase, 2 to 3 percent, at the most,” said John Galiher, CEO of Preferred Freezer Services.

That’s coming from a company that operates more than 35 facilities in nine regions nationwide, employs more than 1,300 and rakes in close to $200 million in annual sales.

“You can’t confuse the construction of new cold storage warehouses with there being a shortage,” Galiher said. “The average occupancy of refrigerated space in North America has not gone beyond 78 percent for the last two decades.”

In most cases, according to Galiher, new cold storage warehouse construction is simply replacing functionally obsolete buildings to meet new standards and energy requirements.

“If you see a refrigerated truck on the side of the road with food melting because there isn’t a warehouse to put it in, you tell them to call us,” Galiher said.

E-mail to: megf@njbiz.com
On Twitter: @megfry3

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