Transportation and the rise of the ‘secondary city’ – a case study

Transportation and the rise of the ‘secondary city’ – a case study

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February 2, 2022

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Changing consumer preferences and the rise of so called ‘secondary cities’ has led to a reframing and in some cases rethinking of transport and logistics systems, a trend that continues to play out in line with new urbanisation dynamics and land use patterns.

Well documented is the shift in spending patterns away from the consumption of services towards the purchase of goods which has been spurred on by the COVID disruption and lockdowns. This shift has resulted in higher expectations from consumers for cheap and reliable delivery and a new competitive frontier for businesses which has in turn pushed transport and logistics networks to improve.

The maturation of e-commerce has led to a move away from cheapest and fastest route to market to deliver goods just in time and towards more resilient supply and logistics chains that can withstand short term disruptions.

Meanwhile, populations have spread out of the major and mega cities, creating secondary cities which are now developing their own major transportation hubs as workers seek more flexible arrangements and alternatives to inhabiting major metro areas.

While long term trends in population movements might not yet be discernible, analysis of United States Census data has shown that the largest cities have experienced the biggest negative growth for the year to July 2020.

Salt Lake City, Utah in the United States is an example of one of the so called secondary cities. This is the home of Igneo portfolio company Patriot Rail’s recent bolt on acquisition Salt Lake, Garfield & Western Railway. This acquisition will likely be the beneficiary of post-COIVD changes in urbanisation and land use patterns.

Patriot Rail has 13 short line railroads across 14 states in the US covering close to 600 track miles carrying cargo relating mostly to paper, packaging, building products and other consumer-driven commodities benefitting from the e-commerce goods and decentralising cities trends.

Anticipating the growing size of these decentralised city hubs Patriot Rail will also acquire parcels of land in specific regions, something it is currently doing in Salt Lake City.

In addition to Salt Lake, Garfield & Western Railway, Patriot Rail will continue to pursue acquisitions of industrial pods to play out this secondary cities theme and is evaluating two new acquisitions in Northern California and the other in the Forth Worth region in Texas. Both of these potential acquisitions will look to bring capital to improve services as e-commerce booms in these regions.

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