Infographic: US Ports On Rise With New Panama Canal
Real Estate company Transwestern's analysis has found US ports expanding terminals and facilities to handle larger ships from Asia are creating knock-on land price effects.
Panama canal expansion may be affecting market dynamics like container throughput, yet New York and Los Angeles/Long Beach Port retain their thrones as container entry points.
At the Port of Los Angeles and nearby Port of Long Beach, recent infrastructure improvements are a matter of retaining market share, Transwestern said.
California’s closer proximity to manufacturers in Asia means California handles 50% of all containerized goods shipped from there to the US.
However the Port of New York and New Jersey (PONYNJ) has seen increasing ship traffic through the Suez Canal and the promise of larger ships passing through the Panama Canal as an opportunity to capture new business, Transwestern explained.
Since 2000, the PONYNJ has been preparing to handle larger vessels and increase overall efficiency.
Now PONYNJ is catching up to its West Coast rivals, having recorded a peak annual volume of 6.25 million TEUs in 2016, or almost 13% of total US container volume.
PONYNJ is the nation’s third-largest port by annual container volume, after the Ports of Los Angeles and Long Beach in the No. 1 and No. 2 spots, respectively.
These expansions have led to rising rental rates in areas around the ports.
Transwestern’s Director of Research for New Jersey Matthew Dolly and Research Manager for Southern California Michael Soto wrote: “Escalating rental rates in the major port markets on both coasts reflect in part the value retailers and manufacturers place on proximity to consumers in the nation’s largest population centers.
“Roughly one-third of the containerized cargo entering Southern California’s twin ports remain in the region to serve 20 million local consumers.
“New York and New Jersey anchor the most populous urban area in the country and constitute a lucrative destination for imported goods, many of which pass through the Suez Canal to reach the region’s consumers.
“As the world’s concentration of low-cost labor shifts from China to India and other markets bordering the Indian Ocean, the volume of goods passing through the Suez Canal to enter the U.S. via East Coast ports will likely increase.
“A limited supply of buildings and the increasing volume of containerized goods to be processed drive demand for warehouse and distribution space at the major ports and enable landlords to command premium rents.
“Near PONYNJ, for example, average asking rent is 36 percent higher than its post-recession low and has reached a record high in each of the past five quarters through the first quarter of 2017.
“Despite high rents near the major ports, a growing number of tenants engage in renewal negotiations long before their lease expiration dates because they have few alternatives.
To view the full Transwestern infographic, see Transwestern's analysis.
“An exception is California’s Inland Empire, where available land is enabling developers to build additional space. Here, however, retailers and distribution operators must weigh the benefits of new space and perhaps more affordable rent against the Inland Empire’s greater distance from the region’s population center, particularly since most new construction is occurring to the east and farther from Los Angeles.
“Despite a decade of media attention predicting that the Panama Canal widening would spread shipping from the major ports to an array of smaller markets on the Gulf and East Coasts, the ports of Los Angeles and Long Beach and PONYNJ have retained their stature as the dominant entry points for containerized merchandise and manufacturing components to be assembled domestically.
“Ports seeking to expand terminals face land constraints, pushing asset prices and rents to new highs As activity at the major ports increases, rising transportation costs and access to labor are overshadowing rental rates as the top factors that companies consider in selecting space.”