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As Seen in Long Island Business News August 10, 2012 By David Winzelberg

Wanted: RE near the railroad

Even in an anemic real estate market, industrial broker Richie Cohen isn’t worried about finding tenants for a certain 150,000 square feet of sublease space in Brentwood.

That’s because the property at 50 Emjay Blvd. has its own rail siding, an accessory in increasing demand from manufacturers and distributors looking to lower their rising transportation costs.

The asking rent for the rail-equipped space at the 31.5-acre Elm Freight Handlers site, owned by Bethpage-based Steel Equities, is $7.25 a square foot, which is nearly a dollar more than asking rents for nearby space without working train transport.

But Cohen, who heads Ashlind Properties in Hauppauge, said the space at the Elm Freight complex, which includes a 10-car rail siding, has already attracted interest from several businesses, including a bakery, paper company and lumber wholesaler, all of which ship heavy goods to and from Long Island.

“We even had people in the beer distributing industry interested,” Cohen said.

With gas prices again flirting with $4 a gallon, that’s no surprise. Moving goods by rail has become more popular here lately, according to Paul Victor, president of the New York & Atlantic Railway, the Glendale-based company that runs freight traffic over the more than 260 miles of Long Island Rail Road tracks in Brooklyn, Queens and Nassau and Suffolk counties. Victor said business for New York & Atlantic is up 20 percent in the last three years.

“The higher the price of fuel, the better our competitive advantage,” he said. One rail car can carry as much freight as about four tractor-trailers, Victor said, saving gas, reducing traffic and improving air quality.

Currently, about 80 Long Island companies use the rail-freight service, which stops at various sidings and trans-loading sites in places such as New Hyde Park, Hicksville, Farmingdale, Wyandanch, Deer Park, Yaphank and Speonk. To handle more shipments, the company is now building a 2,500-square-foot support yard for trains coming in and out of Emjay Boulevard’s mile-long rail siding.

And Victor said there’s room for expansion of the rail-freight network, though it might be cost-prohibitive for small and midsized firms to do so. A high-speed rail siding switch can run more than $1 million; a low-speed connection costs upward of $150,000. Building the track will run between $150 and $175 per foot, Victor said.

Because most of the tracks here are also used by commuter trains, freight trains must run during gaps in the LIRR’s schedule.

While Victor said the system can handle more train trips, there just aren’t enough depots on Long Island for the trains to go to.

“That’s the real limiting factor,” he said.

And that’s why, brokers say, properties that already have active rail connections are in demand.

“If I had an 80,000-square-foot building with active rail, it wouldn’t last,” said Frank Frizalone, of Cushman & Wakefield. “There’s much more interest in rail today than there was five years ago.”

Because each industrial property is unique in size and location, brokers say it’s difficult to put a dollar amount on how much a rail siding adds to the value of a building here. Gary Schacker, of United Realty in Jericho, said active rail would raise the price of an industrial building somewhat, but certain companies can justify the increase.

“They can afford to pay more because they’re going to save more in transportation costs,” Schacker said.

“That’s the real limiting factor,” he said.

And that’s why, brokers say, properties that already have active rail connections are in demand.

“They can afford to pay more because they’re going to save more in transportation costs,” Schacker said.

In lieu of finding their own buildings with rail sidings, Long Island companies can use the new $40 million Brookhaven Rail Terminal in Yaphank, where short-haul truckers connect with trains that take the goods to their destination.

Bayport-based Wenner Bread is now getting its flour deliveries – a million pounds every two days – by freight train via the Brookhaven terminal, replacing about 48 tractor-trailer loads a week.

Chicago-based Ultra Green Energy Services officially opened its biodiesel rail trans-loading facility at the Brookhaven terminal last month. The new facility will be able to store up to 250,000 gallons of pure biodiesel, delivered entirely via rail.

Michael Cooper, vice president of Ultra Green, chose the BRT because the firm wanted to expand its operations from their transloading facility in New Hyde Park and there weren’t many other alternatives on LI for locations that serve the train. He said it would be too expensive for Ultra Green to build its own transloading facility.

“It’s a very finite amount of locations,” Cooper said.

There will soon be more rail-freight customers out east. Industrial buildings at the Enterprise Park at Calverton can now connect to a 2-mile rail spur that New York & Atlantic will operate for the Town of Riverhead.

Frizalone said the Island, given its geography and population, can only benefit from increasing its rail-freight capacity.

“The pushback with Long Island is that shipping is problematic since the Long Island Expressway is a parking lot at certain times of the day,” he said, adding that more rail would help. “I think we’d attract more companies from Queens who would have otherwise had to move to New Jersey.”