The True Cost of Trucking: Truck Terminals

By, Jeff Swenson

Founder & CEO of LineHaul Station

Most trucking companies spend a lot of time focused on optimizing the asset utilization of their trucks and trailers, but not so much when it comes to their truck terminals. The truth is, new truck terminals are darn expensive. And when you calculate the total development costs divided by the number of tractor trailer spaces it will yield, each parking space is almost the same cost as a new truck.

So if you don't like owning unseated trucks, you should probably feel the same about the excess parking spaces that rarely get used at your truck terminals. Over the next few minutes, I will show you how the cost of a new typical ten-acre truck terminal with a small shop and office is about the same as buying more than 80 brand new trucks.

This isn't chump change that we're talking about. And while I understand that you're always better off having the wheels on the truck rolling, it doesn't justify having more terminal space than you really need.

So today, I’d like to host a little math class on the topic. My name is Jeff Swenson, and I'm the CEO of LineHaul Station. I've spent more than 40 years bringing real estate projects to life. I've also spent nearly ten years working on trucking related real estate deals and have a pretty good grasp of the numbers.

Traditional real estate valuation is determined in three basic ways, including the cost approach, comparable sales of existing properties, and net operating income analysis. For this discussion, we are going to primarily consider the cost and market comp methods of valuation as it relates to both private and public sector projects. For any project, five major cost categories: land acquisition, horizontal hard surface costs, vertical building construction costs, offsite and onsite, including utilities, fencing, gates, lights, cameras and landscape. And finally, soft costs related to the project design, environmental reports, engineering plan approval and permits, financing costs and project management fees.

So let's just start with the land and keep in mind that these costs can vary in all of these categories. And we're just illustrating cost ranges that are kind of down the center of the fairway. In real estate we always talk location, location, location, which means the better the location, the higher the price for our example. We are talking about properties located in major metro areas near the Outer-Loop Freeway, with easy access to the primary interstates connecting the surrounding markets.

In broad terms, land costs will generally vary from $200,000 an acre in Midwestern markets like, say, Indianapolis, Kansas City, and Minneapolis to roughly $1,000,000 an acre in Phoenix, Charlotte and Atlanta and all the way up to about $2,000,000 an acre in Southern California and the Upper East Coast. For a typical ten-acre terminal project, it means land costs alone can range from $2,000,000 to over $20,000,000. For our hypothetical project today, we'll use $3,000,000.

Horizontal cost is also a big number if you do it right. Most seasoned trucking veterans will strongly encourage 10” thick concrete because of the wear and tear by an 80,000 pound rig. While it's the best, it's also the most expensive at an eye-popping $700,000 per acre. You can cut costs by doing asphalt, but you'll pay dearly later when it crumbles from the weight. For a ten-acre site, you can estimate that 65% of the property will be hard surface for truck and trailer parking, while the rest will be for the building, landscape and car parking. All in the horizontal cost will likely exceed $5,000,000.

As for the building, most carriers will want about a 20,000 square foot or more shop, parts and office. Here again, the cost can vary based on the construction type and the level of finish, but a reasonable estimate would be $175 a square foot, or $3,500,000 for a building that size.

Off-sites can also vary depending on the current location of utilities, if they're close to the edge of the site. Zero costs if not, the cost can quickly jump into the millions. Other on-site improvements will generally land at about 5% to 10% of total cost, and in this case, we'll ballpark it low at, say, $1,000,000.

Last, soft costs are typically in the range of 20% of total costs. Financing costs and project management fees eat up most of the budget due to nearly two years of interest carry on several million dollars.

So let's quickly summarize our assumptions. We have land at $3,000,000, horizontal improvements at $5,000,000, vertical construction at $3,500,000, on-site improvements at $1,000,000, and total soft costs at roughly $2,500,000 for a total development cost of $15,000,000. Using the 65% parking coverage ratio for a ten-acre site, it will yield about 90 tractor trailer parking spaces at a density of roughly 14 units per acre. If we divide that $15,000,000 by the 90 spaces, the tractor trailer space cost is slightly more than $165,000 per space.

Next, let's talk about the sales comp approach that considers all existing terminals sold over the past two years. We recently completed a study of more than 200 properties sold that were all located in major U.S. markets across the country. Notably, the average land size was 10.8 acres, which is very similar to our new construction example. However, the key difference is that the average age of these terminals was 43 years old, and most of them showed a lot of deferred maintenance in both the building and parking lots, which adds significant additional investment for renovation.

Upon reviewing each of those sites on Google Earth, it was clear that a lot of properties didn't have a very good strategic parking plan. Therefore, we did our own overlay to make sure the site was optimized for parking. And after we ran calculations based on the actual sales price divided by the total parking potential, in summary, we determined that the average property sold for slightly more than $86,000 per tractor trailer space before any renovation costs. Post renovation, we estimate the total cost for space would hit roughly $130,000.

As one specific, newer construction example, we looked carefully at a four-year-old terminal in southwest Dallas-Fort Worth that is owned by a major trucking company with an average quality 33,000 square foot shop and building on 9.9 acres for $18,000,000. With room for 89 spaces, the property price translates to just over $200,000 per space.

And finally, from a slightly different perspective, the U.S. DOT built two truck parking lots a few years ago in Florida and Tennessee. The total cost was almost $38,000,000 for 245 spaces, which equates to $153,000 per space. The difference with these projects was that they only included a couple of bathrooms and a few lights, with no major buildings, fences or other on-site improvements.

So in summary, new or newer terminals will most likely start at $160,000 per space and can quickly jump to over $250,000 depending on land and hard surface costs. Older terminals will easily hit $130,000 a space once they are lightly renovated. And then finally, parking-only type projects with lighter duty asphalt, no concrete, will start at about $60,000 a space and increase to well over $150,000 a space for public sector projects.

In contrast, LineHaul Station is developing a much higher value flex-space truck terminal program that gives every carrier, private fleet, and freight broker the opportunity to have a network of truck terminals at a fraction of the cost shown in our examples.

Rather than spending $5,000,000 to $15,000,000 or more for a single location, LineHaul Station delivers all the first-class features, one space at a time, which significantly reduces your CapEx spend. The cost advantage is huge, and the service and amenities are incomparable to anything you'd ever buy, lease, or build on your own. Fleet Maintenance Center, Truck Wash, Cross Dock, a fantastic private drivers club, is just a short list of the many terrific features all located within a private, fenced and access controlled environment.

I hope this information is helpful and certainly encourage you to share it with everyone that can benefit from the data.