Port Volumes Help Fuel Industrial Real Estate’s Fire

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The industrial market is expected to absorb more than 200 million square feet of space annually over the next two years, and ports will be playing a contributing role in those strong market fundamentals, according to Cushman & Wakefield’s 2021 North American Ports Outlook.   

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The North American ports dealt with some turbulent waters early last year, as the pandemic first hit Asian markets, then spread across the globe slowing shipping traffic. By July, port traffic in the U.S. was turning positive as consumers spent more on imported goods than services during months of lockdown, and the industrial sector proved to be the most resilient commercial real estate sector in 2020, hitting record highs in new leasing activity, deliveries and rents.

“North American ports are a vital economic engine for the U.S. and a huge driver of demand for industrial real estate. With the explosive growth occurring in e-commerce, the demand for industrial space in warehouse, distribution and fulfillment centers has continued to grow. The ports industry remains essential to the supply chain process and will continue to evolve to meet the increased demand for goods,” according to the 38-page report. 

The authors—Carolyn Salzer, director of Americas Industrial & Logistics Research at Cushman & Wakefield; David Bovet, managing partner at New Harbor Consultants; and Tom Keane, partner at New Harbor Consultants—noted that ports’ volume surged in the second half of 2020 and that the trend continued in the early months of 2021.

Due to the strong rebound in the latter part of 2020, overall import TEUs grew 2.0 percent over 2019. “Strong inbound volumes so far in 2021 portend a sharp rebound for the full year,” the report stated, adding import traffic could rise by about 21 percent this year.

East Coast vs. West Coast

However, there is a trend toward larger vessels and consolidation among the major ocean lines that has resulted in fewer port calls and further concentration of volume to the largest ports. On the East and Gulf coasts, there were strong import volumes at the New York-New Jersey and Savannah ports on the East Coast and in Houston on the Gulf Coast. The report noted the Atlantic ports combined for a modest 1.3 percent increase in traffic in 2020.

On the West Coast, overall import TEUs were up 2.4 percent, but there was a difference in traffic, with Long Beach in California experiencing considerable growth and the Northwest Seaport Alliance in Seattle-Tacoma experiencing declines. Although the East Coast has historically seen more yearly traffic, West Coast ports picked up some more traffic in 2020, as importers eager to get supplies to American consumers gambled on making the shorter ocean voyage to the West Coast. The authors expect the decade-long trend that favored the Atlantic and Gulf Coast ports to resume this year.

Inland ports boom

In other trends, inland ports in the Eastern U.S. are experiencing greater intermodal access to ocean ports each year. The report pointed to Virginia’s Front Royal inland terminal as a trailblazer and noted that the states of North Carolina, South Carolina and Georgia have all increased activity with inland ports including Charlotte, N.C.; Greer and Dillon, S.C.; and near Dalton, Ga.

The Appalachian Regional Port near Dalton opened in August 2018 and exceeded its projected 2022 volumes in 2020. Traffic for 2021 is already up about 70 percent over the same time in 2020. Plans are beginning for a new inland terminal in Gainesville, Ga.

“These inland facilities provide powerful supply chain support to manufacturing, distribution and natural resource activities. They serve major automotive operations such as BMW in Spartanburg, S.C.; Michelin in Greenville, S.C. and VW in Chattanooga, Tenn.

Import containers also feed big box retail distribution centers, such as Home Depot in the Front Royal area. These intermodal yards in the Southeast handle exports as backhaul, for example, logs to Asian furniture and construction markets and wood pellets for British, European and Scandinavian electric generating stations,” according to the report.

Infrastructure upgrades

The report also gives a port by port update on major construction projects and infrastructure upgrades as well as statistics on the TEU volumes, major trading partners and other data.

Many of the ports have made infrastructure improvements to handle the larger new Panamex class vessels. The Port of Jacksonville in Florida is deepening its harbor, a project that is expected to be completed in 2022, three years ahead of schedule. JAXPORT has also installed new container cranes to service the wider vessels.

The Port of Miami recently completed $1 billion in infrastructure improvements to increase the depth of the channel and also installed the Super Post-Panamex cranes for the larger vessels. The port has also added a new fast-access tunnel with direct access to the interstate and modernized its on-dock freight rail system to create a connection to the national rail system.

The Port of Los Angeles also began making plans for on-dock rail expansion improvements to enable the BNSF Railway and Union Pacific Railroad to import and export containers directly from the port. Also in Southern California, the Port of Long Beach wants to expand its rail facility. Long Beach has completed a bridge replacement and is redeveloping one of its terminals.

Ports that have completed major projects like the Port of NY/NJ are seeing major payoffs. After raising the Bayonne Bridge, the largest ship ever to call on an East Coast port docked at the Port of Elizabeth in New Jersey in September. Terminals in Jersey City, Bayonne and Elizabeth, all in New Jersey, have seen the new class of massive shops arriving, with many carrying nearly double the amount of cargo as traditional vessels.

Read the full report by Cushman & Wakefield.