How's Alliance Holding Up Through COVID-19?

Mike Berry has had an interesting perspective of the impact of COVID-19 in his job as president of Hillwood, developer of the 26,000-acre AllianceTexas master-planned community and major international logistics hub in north Fort Worth. Movement of goods has spiked through Alliance’s logistics tenants, and a number are hiring.

“It’s been interesting to watch, in a positive way,” Berry said. “I don’t have access to numbers. We can only gauge in terms of what you see, what you hear. Hiring. Aircraft movements. Alliance is a very critical, central supply chain logistics hub.”

Berry, who was named Thursday afternoon to a spot on the Fort Worth Now task force chaired by Mayor Betsy Price, banker Elaine Agather, and businessman John Goff, sat down for a virtual Q&A with Fort Worth Inc. and Fort Worth Magazine.

Big volumes moving through Alliance logistics tenants UPS, Fedex, General Mills, Walmart, Craftsman, and Tom Thumb. “The demand for these products, not just food, but consumer products, has spiked in the last 60 days.”

Hiring: “Many of our companies have been hiring. Walmart, Amazon, logistics. Fidelity Investments has been hiring. The financial service companies have had a huge spike in business. A lot of people are just having to transact. I was a little surprised by that."

Rent collections: “Our rent collections have been in the low 90% range. The only thing that’s been hit hard has been the retail and restaurant sector, simply because a lot of those businesses have had to close."

Rent abatements and other accommodations: “Every case has been different. We’ve had to do a lot of maneuvering with that sector (retail, restaurants) of the base. The rest of the portfolio has been been relatively healthy.”

Hillwood’s testing of its 637 North Texas employees for COVID: In the first phase of testing, “one positive test from among the 637 employees. The positive test was a housekeeping associate from our Frisco Station apartment complex. She worked in the common areas, with very limited exposure. The leasing offices, social rooms, and fitness centers were closed.” No other employees had to be quarantined, and Hillwood sent information about the case to Frisco Station tenants.

Post-COVID expectations: "I think we’ll see continued expansion and growth in the sectors that are part of our backbone again. Logistics, supply chain, e-commerce. [Business will] replenish inventory, at higher inventory levels probably, just to protect and buffer against any future disruption.”

Fort Worth’s – and Alliance’s – position to capture U.S. onshoring of business due to U.S. tariffs and COVID-19: “We need to reduce our reliance on offshore sourcing. We need to do everything we can to create an environment where U.S. manufacturing can be encouraged to reshore” in Fort Worth from overseas locations such as China.

What about Chinese advantages in supply chain and labor costs: “The differential is still there, but it is much compressed. China and Asia, wage rates have grown with the growth of their middle class. But the efficiency and cost of transportation have caused people to rethink. The COVID crisis doesn’t do anything except to accelerate that movement. I think it’s pretty sustainable. There’s this kind of nationalism that’s been created out of COVID.”

U.S. tariffs have closed the gap to an extent. But are they sustainable? “Not to be political, but if Trump stays in office, I think they’re pretty sustainable. You’ve got to balance economics and impact of tariffs on consumer prices in the U.S. It’s a long strategy. Every business is different. Every company’s going to have to make a different decision. Mexico’s going to be attractive to some. Vietnam’s going to be attractive to some. The U.S. will be attractive to others. Nobody’s going to bring back 100% of their manufacturing. Asia is still a huge market."

Potential changes in distribution technology coming out of COVID: “A lot of U.S. manufacturers are implementing automated processes. [Alliance tenant] Stanley Black & Decker has reshored manufacturing to Alliance from China. It’s much more automated.”

Autonomous trucking and other surface vehicles: “That’s where most of the attention is going right now, because it can happen faster [than autonomous air freight technology]. I think you can grow that at a fairly rapid pace.”

Update on Charles Schwab’s headquarters move to Alliance: Schwab is already in the 580,000-square-foot phase 1 of its campus, and is under construction on the 580,000-square-foot second phase. Now at 1,500 employees, Schwab expects to be up to 6,000 employees in its new headquarters. “Is that going to be impacted by [COVID]? Will they change some of their office density projections? I don’t know. Most companies will, at least for a period of time.”

Schwab’s move of the C-Suite to Alliance: “I’m not privy to when the C-Suite is going to move here [laughing]. You’ll have to ask them.”

Alliance’s continued ability to recruit major relocations: It’s about 50% built-out. “We have 50 million square feet right now. We can build easily 35 – 40 million square feet of industrial, and 15 million square feet of office on land we own today.”