U.S. seaports help deliver vital goods to consumers, ship exports overseas and support millions of jobs. In fact, seaports are a vital economic engine for the U.S., and are one of the top demand drivers for industrial real estate. The major seaports across the country all posted strong results in 2017 for both loaded inbound and outbound container volume for a variety of factors.
Import volumes continue to grow due to a strengthening U.S. economy and continued growth in e-commerce, which requires many companies to carry higher inventories to ensure products are in stock. Exports also increased in 2017 thanks to an affordable dollar, creating robust demand for American made goods and agriculture throughout Asia and Europe. Increased container volumes kept demand for warehouse space strong across the country, with more than 254 million square feet of net absorption, 242 million square feet of new development and an all-time low vacancy rate of 5.1% at year-end 2017.
The industrial markets surrounding the nine seaports showcased in this report continue to perform exceptionally well. The markets finished 2017 with a combined overall vacancy rate of 3.3%, significantly lower than the national average. Despite these low vacancy rates, activity was strong as 28 million square feet was absorbed and 24 million square feet completed construction.
The increased demand for goods and rapid changes to the global shipping industries continue to force U.S. seaports to evolve. To get products to consumers quickly and more efficiently, global shippers use progressively larger ships. To better service these larger vessels, almost all ports have been forced to adapt through capital improvement projects. While West Coast ports are naturally better suited for the influx of larger ships due to the deeper harbors, the expansion of the Panama Canal has created an opportunity for more cargo to shift to ports along the East Coast and the Gulf Coast. Dredging and infrastructure projects are underway or planned at nearly all of the ports, pressuring West Coast ports to modernize infrastructure and improve functionality to keep pace.
2017 was another strong year for U.S. seaports, with increased twenty-foot equivalent unit (TEU) counts, a decline in labor disputes and minimal disruption from the major consolidations in the shipping industry. Economic fundamentals and progress on infrastructure improvements should point to another strong year for seaborne shipping, though there are significant headwinds to look out for this year. The biggest risk to U.S. seaports, and thus industrial real estate, is potential hits to global trade. Although the U.S. has imposed broad tariffs on steel and aluminum, some key trading partners are exempt for now.
Tariffs to be imposed by the U.S. on China, who imported over $505 billion worth of goods into the U.S. last year, could raise the price of goods in the U.S. Though demand from American consumers should remain strong despite increased prices brought on by tariffs, particularly with a weak dollar, demand could decline if the current trade skirmish escalates into a full-scale trade war. This could negatively impact both inbound TEU counts and demand for distribution space near seaport locations.
Ultimately, the American consumer will decide what happens to import volumes, but exports could take an even bigger hit. China recently announced counter tariffs to American products, which then prompted another round of tit-for-tat retaliation threats. How much these threats will come to pass, and their eventual impact on export TEU counts at U.S. seaports, is uncertain at this point. But China was the number three importer of American made goods in 2017, so any falloff in demand could have material negative effects on seaport volumes.
In this Industrial U.S. Seaport Outlook, we explore these trends and their effects on ports throughout the country, providing insight into current port capabilities and fundamentals. We also explore how the rapidly changing global shipping industry, consumer preferences in the U.S. and abroad and U.S. trade policies will affect these ports and the surrounding industrial real estate markets in coming years.
Industrial Services Contact:
Pete Quinn, SIOR National Director, Industrial Services | USA +1 317 713 2107 pete.quinn@colliers.com
Research Contact:
James Breeze National Director of Industrial Research | USA +1 602 222 5184 james.breeze@colliers.com
For more U.S. research and analysis from Colliers International, visit colliers.com/en/research.
Reached new port record in 2017 for loaded containers handled (1.76 million).
The Port of Charleston is the top economic driver for South Carolina and is responsible for 1 in 11 jobs in the state. The Port, along with its inland counterparts, accounts for $53 billion in annual economic activity, 187,600 jobs and 10% of the total state GDP. From 2012–2017, it was the fastest growing major port in the U.S. (53%). The Port of Charleston is a gateway port for automotive companies as well as the growing manufacturing industry in the southeast U.S. The Port is also growing as a major point of export of PET pellets to Europe.
With a variety of recent capital improvements, the Port of Charleston is well positioned to compete with other East Coast ports for the increasing number of large container vessels crossing the newly expanded Panama Canal. The most important capital improvement underway is the deepening of the harbor slated to complete at the end of the decade. Increasing the depth from 45 feet to 52 feet will make it one of the deepest harbors on the East Coast. Other important improvements underway include the construction of the Hugh K. Leatherman, Sr. Terminal which will increase container capacity by 50%. It is the only container terminal under construction in the U.S. and is scheduled to complete in 2020.
“One of the fastest-growing ports in the nation, the Port of Charleston is the sixth-largest port in the United States in terms of dollar volume for goods handled. It continues to create future opportunities for growth with three major projects underway: dredging of the harbor to 52 feet, the construction of the Leatherman terminal in North Charleston with a direct connection to Interstate 26 and new cranes to accommodate Post-Panamax ships at all the container terminals. The Port offers access to two-thirds of the nation’s population within a 16-hour drive and connects with two inland ports (Greer and Dillon) in South Carolina to accelerate the movement of goods. This facility has made South Carolina one of the fastest-growing locations for new business in the U.S. — attracting global companies like Boeing, Mercedes Benz, BMW, Michelin and Volvo.”
David Cuda Senior Vice President & Director of Corporate Solutions
Capabilities:
The South Carolina Ports Authority has invested heavily in new cranes and equipment in recent years, and its $1.3-billion capital plan includes equipment purchases and upgrades for the existing and in-development container terminals in Charleston.
The Port of Charleston has 20 active container cranes, all of which are Post-Panamax ready. The current harbor depth of 45 feet can handle Post-Panamax ship sizes and ships with capacity of up to 10,000 twenty-foot equivalent units (TEU) at high tide. The planned deepening of the harbor to 52 feet will significantly expand that capability to ships of up to 13,000 TEUs.
Trade:
The Port of Charleston’s top trade partners include Germany, China/Hong Kong, Japan, the United Kingdom and India — which reflect the Port’s importance to automobile manufacturing in the U.S. Top imports include automobile parts, automobile tires, furniture, cotton and plastics. Top exports include paper products, automobile parts, wood pulp, meat, logs and lumber.
Intermodal Transportation:
The Port of Charleston is served by CSX and Norfolk Southern for daily express intermodal and merchandise rail services, connecting Charleston with hubs across the Southeast, Gulf and Midwest. In addition to CSX and Norfolk Southern’s double-stack intermodal trains, the RapidRail dray program provides a cost-efficient connection between the marine terminals and rail yards.
The Inland Port Greer is also nearby, located on the expanding I-85 corridor. The inland port is surrounded by 94 million consumers within 500 miles and serves to extend the Port of Charleston’s intermodal reach by 212 miles.
Real Estate Impact:
South Carolina’s industrial markets continue to post robust fundamentals, coinciding with the increased cargo flowing through the ports and a large increase in manufacturing in the region. Charleston finished 2017 with a massive amount of new development completed or under construction. More than 1.8 million square feet completed construction, equal to 3.8% of the markets total inventory, and an additional 3 million square feet is under construction and slated to complete this year. This will increase Charleston’s existing inventory by 6.2% in 2018.
With demand for new, larger fulfillment centers to handle the insatiable demand from e-commerce retailers, the Greenville-Spartanburg-Anderson market is becoming an industrial powerhouse and one of the top emerging industrial markets in the country. Three growing industrial fields dominate the area: automotive (anchored by BMW and Michelin), advanced materials manufacturing (supporting the specialty textiles industry serving Boeing and the automotive sector) and the logistics and distribution facilities that serve the southeastern United States. These factors help the region post robust fundamentals including 3.6 million square feet of net absorption in 2017. A large amount of development (5.3 million square feet) completed in 2017, with an additional 2.5 million square feet slated to complete this year.
21.6% increase in loaded inbound containers in 2017 — the highest in the country.
The Port of Houston is a 25-mile-long complex of more than 150 private and public industrial terminals along the 52-mile Houston Ship Channel. Each year, more than 241 million tons of cargo move through the Port of Houston, carried by more than 8,200 vessels and 223,000 barges. The Port is consistently ranked at or near the top in the U.S. in terms of foreign waterborne tonnage, imports/exports and total tonnage handled. It is also one of the nation’s leading breakbulk ports, handling 41% of project cargo at Gulf Coast ports.
The Port has been instrumental in the city of Houston’s development as a center of international trade. Carrier services on all major trade lanes link Houston to international markets around the globe and the ship channel intersects the busy barge traffic lane of the Gulf Intracoastal Waterway. Surrounded by one of the nation’s largest populations, Houston is also centrally located as a strategic gateway for cargo originating in or destined for the western and midwestern United States.
Houston’s port activity continues to grow after the opening of the expanded Panama Canal and the impending completion of more than $50 billion of new petrochemical plant infrastructure along the Gulf Coast. The Port of Houston plans to undertake significant infrastructure improvements in the next few years to accommodate future demographic growth in the region as well as the larger vessels and increased cargo resulting from the Panama Canal expansion. Improving efficiency at the public terminals through more modern facilities and equipment is essential to meeting one of its mandates — to promote and facilitate commerce to benefit local partners, Texas and the nation.
“Development activity and leasing on the far-east side of Houston continues at an accelerated pace. The majority of that activity can be tied directly to the Port of Houston and its significant economic contribution, fueling 2.7 million jobs and $617 billion in activity. The Houston ship channel is home to the second-largest petrochemical complex in the world and is a major contributor to Houston’s position as the number-one port in the nation, by total tonnage (165 million metric tons). The imposition of potential tariffs on inbound steel products could have a minimal impact on current volume. Whereas outbound exports on petrochemical products, namely plastics, may be impacted in the billions of dollars due to potential tariffs.”
Gary Mabray, SIOR Principal | Houston
Capabilities:
There are two container terminals at the Port of Houston: the Barbours Cut Container Terminal and the Bayport Container Terminal. The Port has 41 cranes, 13 of which are Post-Panamax ready. The Port’s depth of 45 feet can handle Post-Panamax ships of up to 6,000 twenty-foot equivalent units (TEU).
Trade:
Loaded imports into the Port of Houston increased by a whopping 21.6% in 2017 to a record 1.1 million TEUs. While exports also increased in 2017 to a record 966,197 TEUs, this is the first time in over a decade that loaded imports exceeded loaded exports at the Port of Houston. China/Hong Kong surpassed Mexico as the top trading partner for the Port in 2017 — a sign that the Panama Canal expansion is adding import volumes to the Port. Other top trading partners included Mexico, Brazil, Germany and the Netherlands. While energy-related commodities dominate imports and exports at the Port of Houston, other top imports include motor vehicles, furniture, plastics and cotton.
Intermodal Transportation:
Both container terminals at the Port of Houston offer modern intermodal services via three Class I rail providers BNSF, Union Pacific and Kansas City Southern.
Real Estate Impact:
The resiliency of Houston’s industrial real estate market is truly astounding. Three years into the oil and gas downturn, Houston has proven yet again that it has a truly diversified economic base. As a result, Houston’s industrial real estate market has enjoyed a disproportionate benefit of that concerted effort to have a truly balanced economy. The growth of e-commerce, the region’s natural population growth, the increased Port of Houston infrastructure investment and the increased consumer demand all contributed to a robust industrial market that truly reflects Houston’s economic diversity and its ability to bounce back from adversity. While Houston was a late-comer to the unprecedented growth of e-commerce logistics, it has recently seen large amounts of space taken by Amazon, UPS, FedEx and other providers, who are establishing regional distribution and return centers related to online sales.
At year-end the Houston market had just under 550 million square feet of existing industrial inventory, making it the sixth-largest industrial market in the country. Overall vacancy rates remained low at 5.4% despite over 8.5 million square feet of completed development, which ranked seventh in the country in 2017. Looking ahead, continued disruption and growth in the e-commerce arena; increased use of the Port of Houston infrastructure to handle inbound containerized consumer goods and outbound raw material shipments; natural population growth; and in-bound migration will drive increased consumer spending and keep industrial real estate demand robust for the foreseeable future.
Yet Houston is not the only market that benefits from the Port of Houston. Many industrial markets throughout Texas see the Port as a demand driver, including Dallas-Fort Worth, where much of the imports are funneled. Dallas-Fort Worth remains one of the most active industrial markets in the U.S. and finished 2017 as the top market in the U.S. for overall net absorption at 23.3 million square feet and construction completions at 27.6 million square feet.
The deepest natural harbor in the United States at 76 feet.
The Port of Long Beach is one of the top seaports in the U.S. and is a leader in goods movement and environmental stewardship. Each year, more than $180 billion in trade moves through Long Beach. Everything from clothing and shoes to toys, furniture and consumer electronics arrives at the Port before making its way to store shelves throughout the country. Specialized terminals also move petroleum, automobiles, cement, lumber, steel and other products. The Port of Long Beach supports more than 30,000 jobs in Long Beach, 316,000 jobs throughout Southern California and 1.4 million jobs throughout the United States. It generates about $16 billion in annual trade-related wages statewide.
The Port is a leader in innovative environmental programs, with a Green Port Policy helping to minimize or eliminate negative environmental impacts. Serving as a model for ports around the world, the Port of Long Beach pioneered programs including the Green Flag vessel speed-reduction program to improve air quality, “green leases” with environmental covenants and the San Pedro Bay Ports Clean Air Action Plan. The Port is also moving to outfit its container terminals with shore power, which allows docked ships to plug into land-based electricity instead of burning diesel fuel to run their engines. At least one berth at every container terminal has shore power, but by 2020, all container berths will have shore power.
“The Port of Long Beach may be the number two port in the U.S. in terms of container volume, but it is leading the way with the largest capital improvement program in the country. Currently, the Port is about halfway through their planned total spend of $4.5 billion for enhancements, which will increase efficiencies at the Port. Among the many projects, they are improving on-dock rail with a new Pier B rail yard and constructing a brand new Gerald Desmond bridge which will upgrade truck access to major arterial freeways and improve the clearance under the old bridge by 50 feet to allow the largest ships to dock in the back harbor. The Port is already seeing benefits to their efforts as it had the best year ever, gauged by container volume, in 2017.”
Chuck Littell Senior Vice President | Colliers Logistics and Transportation Solutions Group, Los Angeles
Capabilities:
The Port of Long Beach has the deepest harbors in the U.S. at 76 feet, making it the only port in the country deep enough to handle some of the largest container ships in the world. The Port can accommodate vessels capable of holding up to 15,000 twenty-foot equivalent units (TEU). Like the Port of Los Angeles, this creates a notable advantage over many East Coast ports. The port features six container terminals, 10 piers, 80 berths and 66 Post-Panamax cranes.
Trade:
Nearly 73% of the total loaded containerized volume at the Port of Long Beach is from imports. The Port finished 2017 with a record 3.9 million loaded inbound TEUs handled, a 12% increase compared with 2016. Overall, 5.3 million loaded TEUs were handled, also an all-time record for the Port.
Top trading partner countries in 2017 were China/Hong Kong, South Korea, Japan, Taiwan and Vietnam. The top imported items in 2017 were oil, motor vehicle parts, computers, TVs and furniture. Top exports in 2017 included cotton, motor vehicles, motor vehicle parts, almonds and frozen beef.
Intermodal Transportation:
Five of the six terminals at the Port of Long Beach include on-dock rail facilities, from which cargo can reach Chicago in 72 hours. Like the Port of Los Angeles, there are two Class I rail operators at the Port of Long Beach: Union Pacific and BNSF. The Intermodal Container Transfer Facility (ICTF) is only a few miles away and has improved rail service across the country and between the ports of Los Angeles and Long Beach and major nearby railyards.
Real Estate Impact:
Like its sister port in Los Angeles, the Port of Long Beach is surrounded by the largest industrial markets in the country. The Greater Los Angeles market is not the only market that relies on imports from the Ports of Long Beach and Los Angeles to stock its warehouses. Just like with the Port of Los Angeles, Southern California’s Inland Empire industrial demand is heavily reliant on inbound container volume from the Port of Long Beach.
The Inland Empire has become one of the most dynamic markets in the country, constantly finishing in the top five in terms of activity and development. The Inland Empire has also become the premier big-box e-commerce hub for the western U.S. with Amazon.com alone currently occupying more than 7 million square feet — its largest footprint in the country. In 2017, a whopping 27.2 million square feet of big-box product leased in the Inland Empire, by far the most in the country, with many occupiers siting the region’s population and close location to the ports as the top reasons for moving into or expanding within the market.
Both the Ports of Los Angeles and Long Beach feed Southern California warehouses, but their reach does not stop there. Much of the products flowing into both ports end up in two other emerging markets in the southwest, Phoenix and Las Vegas. The Phoenix industrial market continues to post robust fundamentals and that momentum is forecast to carry over into 2018. Demand is robust in Phoenix because of the area’s many logistics advantages, a strong economy and a growing population. Net absorption has been quite strong for the past several years and hit a record in 2017. This robust tenant demand is fueling new development. With vacancy at a 10-year low, spec and build-to-suit projects continue to work their way through the development pipeline.
The Las Vegas industrial market posted some of the strongest fundamentals in the country in 2017. Demand is driven by both regional distributors that are picking the region over other areas in Southern California and local businesses that are expanding because of the area’s growing economy and population. Las Vegas’ proximity to California means that over 26 million people live within 250 miles of the market, over 22% of which are millennials.
#1 U.S. port for loaded inbound container volume in 2017 (4.7 million TEUs).
Dubbed “America’s Port,” the Port of Los Angeles encompasses 7,500 acres of land and water along 43 miles of waterfront. As the largest port in the U.S. in terms of container traffic, the Port handled 6.6 million loaded twenty-foot equivalent units (TEU) in 2017 — setting an all-time record for the Port. The reason for the Port’s success is its deep natural harbors, its proximity to Asia and the surrounding region’s large and growing population.
The Port of Los Angeles has more than $2.6 billion of capital improvements planned for the next decade to modernize and improve its terminals, rail and warehouse infrastructure. The Port is also committed to the environment, including efforts such as a clean truck program, reducing emissions of ocean-going vessel operations, improving water quality and significantly increasing the use of solar power. Despite the expansion of the Panama Canal and related improvements along East Coast ports, the Port of Los Angeles is expected to remain the top port in the U.S., in terms of cargo volume, for the foreseeable future.
“The Port of Los Angeles is the largest gateway for international trade to the approximate 50 million consumers living within a 6-hour driving radius of the Port. The imports are typically transported from the Port into Southern California warehouses for local delivery. The increased demand from consumers has propelled the Southern California industrial market to become the most active industrial market in the country and also the most desirable for institutional investors. Demand for new warehouses is at record levels and construction is striving to meet the demand. The supply chain is struggling to meet the demand for same-day delivery and hiring record levels of new employees.”
Kevin McKenna, SIOR Executive Vice President | Ontario
Capabilities:
The Port of Los Angeles has one of the deepest harbors in the U.S. at 53 feet, deep enough to handle vessels capable of holding up to 15,000 TEUs — a significant advantage over ports along the East Coast. The Port contains nine container terminals, 15 marinas and 30 berths equipped with Alternative Maritime Power®. There are 86 total cranes at the Port, with 72 able to handle Post-Panamax vessels (6,000 TEUs).
Trade:
A majority of the total containerized volume coming through the Port of Los Angeles is from imports. At the end of 2017, 71.2% of loaded containers handled at the Port were from imports. Top trading partner countries in 2017 were China/Hong Kong, Japan, South Korea, Vietnam and Taiwan. Computers, motor vehicles, oil, cell phones and televisions were the top imports in 2017, while civilian aircraft parts, motor vehicle parts and computer chips were the top exports.
Intermodal Transportation:
There are two Class I rail operators at the Port of Los Angeles: Union Pacific and BNSF. The Intermodal Container Transfer Facility (ICTF), operated by Union Pacific, is a large near-dock rail yard located approximately five miles from the Port of Los Angeles. Since opening in 1986, the ICTF has greatly enhanced transcontinental rail service as well as the relay of marine cargo containers between the ports of Los Angeles, Long Beach and major rail yards near downtown Los Angeles.
Real Estate Impact:
Greater Los Angeles — which includes Los Angeles County, Orange County and the Inland Empire — totaled 1.6 billion square feet of existing industrial inventory at the end of 2017, making it the largest industrial region in the country. Demand for industrial real estate in all markets is robust, with the surrounding ports remaining one of the top drivers.
In 2017, Los Angeles County, which comprises the Central Los Angeles, Mid-Counties, South Bay, San Fernando Valley and San Gabriel Valley posted the lowest vacancy rate in the U.S. at 1.4%. Overall vacancy rates remain low despite over 6.6 million square feet of new development. Much of this new development was on locations of old industrial or manufacturing sites. While the process of redeveloping old sites is costly, occupiers are willing to pay high rents to be located near the ports and its massive population base. Redevelopments will continue in the future and Los Angeles County could be a top candidate for the next multi-story warehouse that breaks ground in the U.S.
Located approximately 50 miles east of the Port of Los Angeles, the Inland Empire has become one of the most dynamic markets in the country, constantly finishing in the top five in terms of activity and development. The Inland Empire has also become the premier big-box e-commerce hub for the western U.S., with Amazon.com alone currently occupying more than 7 million square feet — its largest footprint in the country. In 2017, a whopping 27.2 million square feet of big-box product leased in the Inland Empire —by far the most in the country—with many occupiers citing the region’s population and proximity to the ports as the top reasons for moving into or expanding within the market.
Largest 250-mile radius population of any port in North America (61 million people).
The Port of New York and New Jersey is the busiest container port on the East Coast with 32%of the market share, and is the third-largest container port in North America. More than 61 million people live within 250 miles of the Port — the highest population within that radius for any port in North America. The New York-Newark-Jersey City Metropolitan Statistical Area (MSA) also ranks first in the nation in current-dollar GDP. Because of this, the Port of New York and New Jersey is best positioned to take advantage of the increased imports and larger ships crossing the newly expanded Panama Canal.
The Bayonne Bridge — an arch bridge spanning the Kill Van Kull strait connecting Bayonne, NJ with Staten Island, NY — raised its clearance in June 2017 from 151 feet to 215 feet, high enough for ships of 5,000 twenty-foot equivalent units (TEU) and larger to enter the Port. This was a necessity to compete with other ports along the East Coast for the larger ships crossing the expanded Panama Canal. Other capital improvement projects underway include the replacement of the Goethals Bridge, an expansive road-widening project set to complete in 2019 and a significant investment in the Port’s rail capabilities including the expansion of on-site rail facilities.
“Cargo volumes set new records at the Port of New York and New Jersey (PONYNJ) in 2017, with existing annual cargo volume surpassing the previous record set in 2015 by 5.3%. The record volumes can be attributed to completion of the Bayonne Bridge Raise the Roadway project in June 2017, which allowed larger cargo ships to pass under the bridge. This new record cemented the PONYNJ position as the third-largest port in the U.S. and remains the busiest port on the East Coast in 2017. As the Port continues to set new volume records, demand for new industrial construction has surged. New Jersey’s industrial market has responded well, recording historic leasing activity and rental growth and construction along with increased investor demand.”
Michael Markey Executive Managing Director
Capabilities:
The Port of New York and New Jersey has a harbor depth of 50 feet, deep enough to handle vessels capable of holding up to 12,000 TEUs. The Port contains six container terminals, 32 berths and 61 cranes— with 47 cranes able to handle Post-Panamax vessels.
The Port of New York and New Jersey operates extensive environmental programs, including proposed strategies to reduce air emissions from shipping and an Environmental Management System to reduce the impact of facilities operations.
Trade:
A majority of the total containerized volume flowing through the Port of New York and New Jersey is from imports. At the end of 2017, 70.6% of loaded containers handled at the Port were from imports. Overall, 4.8 million loaded inbound and outbound TEUs were handled at the Port in 2017— an all-time record for the Port. Top trading partner countries in 2017 were China/Hong Kong, Germany, India, Italy and Japan. Motor vehicles, pharmaceuticals, gasoline and oil were the top imported items, while motor vehicles, scrap iron and steel, pharmaceuticals and skin care products were the top exports.
Intermodal Transportation:
The Port of New York and New Jersey’s Express Rail System handles more than one-third of the cargo that feeds the Eastern Seaboard, with coverage to every major city in the Midwest, Northeast and Eastern Canada. Class I railroad partners such as CSX, Norfolk Southern and Canadian-Pacific Railway service the Port. The Port’s on-dock rail terminals handle same-day transfers between ship and rail. The Port also invests $1.5 billion through 2024 to enhance port access by rail, which will include improvements such as an expanded roadway capacity and modernized intermodal rail service.
Real Estate Impact:
Because of the large surrounding population, the Port of New York and New Jersey is a major demand driver for many industrial markets across the Northeast and Mid-Atlantic U.S. However, the markets that receive the most direct benefits are Northern New Jersey and Central New Jersey. New Jersey's industrial markets had a strong end to the year, with market fundamentals setting new historic benchmarks. Annual leasing activity surpassed the 40 million square feet mark for the third consecutive year at 44.8 million square feet. This was an increase of more than 7% from the trailing five-year average of 41.7 million square feet.
Robust tenant demand has continued to drive down the availability rate, even as new product comes online at a rapid pace. 2017 ended with an availability rate of 6.1%, which represents an improvement of 110 basis points (bps) from the prior year. Developers accelerated their development pipeline as a result of the lack of available space. In the fourth quarter, 10 projects totaling 4.5 million square feet broke ground, bringing the total construction pipeline to 45 properties totaling 17.1 million square feet. Although the construction pipeline is at historical highs, many projects already have lease commitments in place prior to completion.
Northern-Central New Jersey also has a booming big-box market. The big-box market (200,000 square feet and above) in Northern and Central New Jersey remains robust due to an ample amount of land to develop new product, as well as increased activity driven by the strength of the overall economy and the growth of e-commerce. Additionally, the greater metropolitan market has the benefit of being in one of the most densely populated, affluent areas in the country.
Big-box vacancies are projected to rise to a healthy level in 2018 because of a significant increase in under construction product which finished 2017 at nearly 15 million square feet, the most in over a decade. This new inventory is greatly needed, especially in product, more than 500,000 square feet and will increase new leasing and net absorption numbers in 2018. The addition of new Class A product to the market will also increase, taking rents beyond its current record high and keep investor demand in the market robust for the foreseeable future.
2.3 million loaded TEUs handled in 2017, 2nd highest on record.
The Northwest Seaport Alliance was created in 2015 and was the first arrangement of its kind in North America. The ports of Seattle and Tacoma joined forces to unify management of marine cargo facilities and business operations to strengthen the Puget Sound Gateway.
The dedication to the shipping industry has been well received, with 40% of the state’s family-wage jobs tied to international trade. In fact, marine cargo operations in the Tacoma and Seattle harbors supports 50,000 jobs and generates nearly $4.3 billion in economic activity. Marine cargo activity also generates nearly $140 billion in total economic activity, one-third of Washington’s state GDP.
The Northwest Seaport Alliance is amid a 10-year strategic plan to grow cargo volumes, create jobs and improve its financial performance. The plan includes developing and managing strategic terminals that are equipped to handle newer, larger container ships and the associated additional cargo. Investments currently under way include the Terminal 5 Berth Modernization and the Pier 4 Reconfiguration, which will create one contiguous berth capable of serving two 18,000 twenty-foot equivalent unit (TEU) ships.
“The Northwest Seaport Alliance, which includes the ports of Seattle and Tacoma, continues to make great leaps forward for the Puget Sound region. Today it’s the fourth- largest gateway in North America by total TEUs and is the #1 North American gateway for refrigerated exports; supports 48,000 marine cargo-related jobs; and generates$4.3 billion in statewide business revenue. The Northwest Seaport Alliance is also going “green” by reducing diesel emissions — rates have dropped by 80% between 2005 and 2016.”
Scott Alan, SIOR Senior Vice President | Seattle
Capabilities:
The Northwest Seaport Alliance has 10 container terminals, 22 international container carriers and four container carriers providing regular sailing to Alaska and Hawaii. The Northwest Seaport Alliance has 47 cranes, 43 of which are Post-Panamax ready. The natural harbor depth can handle ships of up to 12,000 TEUs.
Trade:
A majority of the total containerized volume coming through the Northwest Seaport Alliance was from imports in 2016, however the rate of exports as a percent (40.1%) is much higher than other ports like the Port of Los Angeles and the Port of Long Beach. In 2016, the Northwest Seaport Alliance took advantage of the labor issues at other west coast ports and handled a record 2.4 million loaded TEUs. While that count dropped slightly in 2017 to 2.3 million TEUs, it was still the second-best year on record for the Port.
The Northwest Seaport Alliance is one of the top ports for domestic shipping, handling 80% of total trade with Alaska. Internationally, top trading partner countries in 2017 were: China/Hong Kong, Japan, South Korea, Taiwan and Australia. Furniture, auto parts and toys were the top imported items while animal feed, paper and lumber were the top exports.
Intermodal Transportation:
Both BNSF and Union Pacific provide fast transcontinental service from the Northwest Seaport Alliance to key distribution points across North America. Both train lines provide competitive transit times from nine on,- or near-dock, intermodal yards and three nearby intermodal facilities including the Tacoma South Intermodal Facility, the South Seattle Intermodal Facility and the Northwest Container Services.
Real Estate Impact:
The Northwest Seaport Alliance is a major driver for the Puget Sound industrial market which includes markets in and around Seattle and Bellevue. Situated in the economic powerhouse of the Pacific Northwest, Seattle is one of the fastest-growing cities in the nation, making it a popular industrial market for both regional and last-mile distribution.
With a vacancy rate of approximately 3% and a lack of big land sites left in the core markets, vacancies in Puget Sound remained low, finishing 2017 at 2.9%, significantly lower than the national average of 5.1%. Vacancy rates remained low despite 3.5 million square feet of new development. The good news for the market is there will be a robust amount of new development that will hit the market this year. At year-end, 4.8 million square feet was under construction.
This new amount of product will provide more opportunities for occupiers and could increase leasing and absorption fundamentals in the coming quarters. With the market’s current fundamentals, industrial asking rental rates are expected to continue to increase roughly 10%–15% per year for at least the next two years. With such strong leasing levels and elevated rental rates, Puget Sound industrial properties will remain solid investments for years to come.
Highest percentage of total loaded container volume from exports in 2017 (50.3%).
The Port of Oakland was established in 1927 and is a world-class international cargo transportation and distribution hub. Located on the mainland shore of San Francisco Bay, one of the great natural harbors of the world, Oakland was among the first ports globally to specialize in the intermodal container operations that have revolutionized international trade and stimulated the global economy.
The Port of Oakland completed many projects in 2017 to stay competitive and environmentally conscious. Beginning in Spring 2017, up to six 366-foot-tall cranes at the Port of Oakland’s largest terminal are in the process of being raised 27 feet to make it easier to load and unload megaships. The Port, which operates its own electric utility, also approved a deal to purchase solar power for the next 20 years. Under the agreement, the Port will buy approximately 11,000 megawatt hours of electricity annually from a solar farm.
With terminal expansion projects well underway or completed, Oakland is now focusing on developments within the harbor footprint, that will improve efficiency and differentiate it from other U.S. ports. The Cool Port cold storage and transloading facility, which is scheduled for completion in August 2018, will feature a rail track running up the middle of a structure with dozens of truck bays. This will allow frozen and chilled products to be unloaded from rail cars and transloaded into marine containers in a temperature-controlled environment.
“The Port of Oakland was the first major port on the Pacific Coast and today it is one of the busiest container ports in the United States. Serving one of the nation’s largest metropolitan areas, the Port loads and discharges more than 99% of containerized goods moving through Northern California and generates more than 73,000 jobs across the region, connecting 827,000 jobs nationwide. The Port of Oakland is an ideal location for logistic and industrial distribution because it’s surrounded by one of the world’s wealthiest regions, with a population of 10 million e-commerce consumers. This is a positive influence for major institutional landlords and occupiers in the growing e-commerce industry.”
Greig Lagomarsino, SIOR Executive Vice President | Oakland
Capabilities:
A total of seven terminals serve the Port of Oakland. All shipping channels and 90% of the 18 berths at the port are dredged to 50 feet to make them capable of accommodating vessels up to 12,000 twenty-foot equivalent unit (TEU) capacity. The Port has a total of 34 cranes, 27 of which are capable of handling Post-Panamax vessels.
Trade:
Agricultural export tonnage has grown significantly at the Port of Oakland in the past five years. The result has transformed the Port’s trade profile, making Oakland a leading gateway to Asia — especially for California growers. In fact, 76% of Oakland's trade is with Asia. Europe accounts for 14%, Australia/New Zealand and Oceania about 5% and other foreign economies about 5%.
After reporting a 10.4% increase in loaded export trade volume in 2016 of 947,454 TEUs, loaded exports declined slightly in 2017 to 930,826 TEUs. Overall, 50.3% of total loaded container volume handled at the Port was from exports — the highest for a major port in the U.S. Top trading partners include China/Hong Kong, Japan, South Korea, Taiwan and Vietnam. The top imports include automobiles, computers, wine and furniture. Top exports include edible fruits and nuts; beef and pork; beverages and spirits; motor vehicles; and rice.
Intermodal Transportation:
Two Class I rail providers service the Port of Oakland. Union Pacific and BNSF railroad facilities are located adjacent to the heart of the marine terminal area, to provide reliable and efficient movement of cargo between the terminals or transload facilities and the intermodal rail facilities.
Real Estate Impact:
While Oakland remains the top beneficiary of the Port, the Port of Oakland is a top demand driver for all East Bay and Central Valley industrial markets. At the close of 2017, Oakland posted one of the lowest industrial vacancy rates in the country, at 1.8%. Oakland also has one of the highest industrial asking rents in the country, finishing 2017 at $10.80 per square foot per year.
In December, port commissioners gave final approval to a $52 million expansion plan at the Port of Oakland, which would create much needed distribution space in the market. The first phase of CenterPoint Properties’ Seaport Logistics Complex will eventually span 180 acres at the former Oakland Army base. Construction is expected to start in early 2018, with an expected completion date in the spring of 2019.
Despite this new industrial development, Oakland is an infill market, and because of this, other markets further east with available land are ramping up big-box development. One of those markets is Stockton-San Joaquin County which is one of Colliers Top 10 Emerging U.S. Industrial Markets to Watch in 2018. Development remains strong in Stockton due to large amounts of available land in the region.
Nearly 4 million square feet of industrial product was completed in 2017, bringing the post-recession total to just under 12 million square feet, which equals 11% of the total inventory in the market. New development looks to explode in the coming year with 7.6 million square feet currently under construction. With activity strong in this product, combined with growing demand from tenants looking to move into the region, new development will be robust for the foreseeable future.
Despite a large amount of new development, the overall vacancy rate declined significantly in 2017 to 4.8%, 120 basis points lower than the previous year, and significantly lower than the recession high vacancy rate of 17.8% in 2010. Despite a large amount of new product coming on line in the coming year, vacancy rates will remain low in the region for the foreseeable future.
1.9 million loaded inbound TEUs handled in 2017 — an all-time record.
The Port of Savannah is the fourth-largest seaport in North America and the second-largest on the East Coast. The Port of Savannah is home to the Garden City Terminal — the largest single terminal in the U.S. — which operates two Class I rail yards. The Port of Savannah is only a four-hour drive to some of the largest industrial markets in the U.S., including Atlanta, Charlotte and Orlando.
In the coming years, the Port of Savannah will expand its reach to new markets through the growth of intermodal rail, the deepening of the Savannah River and the acquisition of additional cranes to accommodate giant cargo ships. The Port of Savannah is also creating alliances with other ports along the East Coast to stay competitive in an era of shipping consolidation.
The East Coast Gateway Terminal Agreement between the Port of Savannah and the Port of Virginia has changed the landscape of the ports significantly. Ports are now able to jointly acquire operating systems and equipment; jointly draft agreements with carriers, shippers and terminal operators; and jointly create marketing materials to attract services, alliances and carrier network agreements. The ports are reaping the benefits, with increased twenty-foot equivalent unit (TEU) counts — a direct result of improved and streamlined rail functions at both ports because of this agreement.
“The Port of Savannah is one of the fastest-growing ports in the nation. Year-over-year, the Port of Savannah has seen robust activity driven by its one-of-a-kind infrastructure. This infrastructural access to the area's two major interstates, Interstate 95 and Interstate 16, not only feeds the Savannah industrial market but also areas throughout the southeast U.S. With many ongoing improvement initiatives, including the Savannah Harbor Expansion Project (SHEP) and the Mason Mega Rail project, the Port of Savannah is setting itself up for long-term success and sustainability.”
David Sink Principal | Savannah
Capabilities:
The Port of Savannah has two terminals: the Ocean terminal and the Garden City Terminal, which is the busiest single terminal in the U.S. The Port of Savannah has 36 cranes in service, 26 of which are Post-Panamax ready. Currently, the harbor depth can only handle ships up to 6,000 TEUs. However, projects to deepen the harbor to 47 feet are slated to complete in the next five years.
Trade:
While a majority of the total containerized volume coming through the Port of Savannah in 2017 was from imports, the rate of exports is much higher than at the three larger ports in Los Angeles, Long Beach and New York/New Jersey. At the end of 2017, nearly 1.9 million loaded import TEUs were handled at the Port, a 12.3% increase compared with the previous year. Just as impressive, over 1.3 million outbound TEUs were handled in 2017, another record for the Port.
Top trading partner countries in 2017 were China/Hong Kong, Germany, Japan, South Korea and India. Pharmaceuticals, motor vehicle parts and furniture were the top imported items in 2017 while motor vehicles, cotton and poultry were the top exports.
Intermodal Transportation:
The Port of Savannah is the only East Coast port with two Class I rail yards. These rail yards provide service to and from major population centers in the Southeast, Gulf Coast and Midwest U.S. and are a vital transportation method that feeds the Atlanta industrial market. The Port also features two intermodal container transfer facilities located in a single terminal, which are served by CSX and Norfolk Southern Railway. The Port’s intermodal service has the fastest westward transit times in the South Atlantic region, including overnight service to Alabama, Georgia, Florida, North Carolina and South Carolina.
In March, the Georgia Port Authority announced the groundbreaking of the Mesa Mega Rail Terminal. The terminal will increase the Port of Savannah’s rail lift capacity to 1 million containers per year, and open new markets spanning an arc of cities from Memphis to St. Louis, Chicago to Cincinnati. In the first half of 2018, work will focus on constructing a pair of rail bridges that will carry a total of seven tracks connecting two existing intermodal container transfer facilities. Georgia Ports Authority (GPA) officials estimate that the new terminal will begin to come online by the fall of 2019, with project completion in the fall of 2020.
Real Estate Impact:
The Port of Savannah continues to be a boon for industrial real estate markets in the state of Georgia. The Savannah industrial market continues to post robust industrial fundamentals and finished 2017 as the top industrial growth market in the country with net absorption, as a % of inventory, of 8.7%. Because of insatiable demand to be near the ports, new construction increased to 5.8 million square feet in 2017 — the highest on record.
Despite this large amount of absorption, the overall vacancy rate was only 3.4% at year-end. Development will remain robust in 2018, as at year-end, more than 5 million square feet was under construction. A majority of this was build-to-suit development that will keep vacancy rates tight and demand high for new space near the Port for the foreseeable future.
Many imports from the Port of Savannah also flow into other major industrial markets, including Atlanta — one of the largest industrial markets in the country. The Atlanta industrial market was a top performer of 2017, finishing second in the country in overall net absorption, with occupancy gains of 22.6 million square feet and 18 million square feet in new development.
Atlanta remains one of the most in-demand big-box markets with nearly 180 million square feet of existing inventory. In 2017, more than 16 million square feet of big-box space leased, the fourth-highest in the country. Looking ahead, the Atlanta and Savannah industrial markets will continue to experience robust demand from occupiers who desire to be near the Port of Savannah to enjoy its logistics advantages, leading to strong fundamentals for the foreseeable future.
33% of goods entering and exiting the Port of Virginia are handled by rail.
With some of the most advanced container terminals in all of the Americas, the Port of Virginia serves as a global gateway to commerce. It is also an economic engine for the Commonwealth of Virginia and the contiguous Mid-Atlantic states. More than 374,000 jobs are linked to the Port — equal to 9.4% of Virginia’s workforce. The Port of Virginia is home to Foreign Trade Zone 20, where more than $1.6 billion of total merchandise is received annually. The Port of Virginia offers direct service to more than 45 countries worldwide and is a day’s drive from two-thirds of the U.S. population.
The future of the Port of Virginia is bright. With a current depth of 50 feet, the Port is also in the process to dredge an additional five feet. When congressional approval is complete, the Port of Virginia will have the deepest channel depth on the East Coast. Also, the Norfolk International Terminals (NIT) Optimization Project will work to modernize and expand the Port’s rail and motor transportation capabilities in the coming years.
“The Port of Virginia’s momentum continues: 2017 was another record-setting year for cargo volume. It also saw the arrival of the largest vessel to serve Virginia, the CMA/CMG Theodore Roosevelt, with a capacity of 14,400 twenty-foot equivalent units (TEU). But more importantly, the Port saw significant progress in its capacity expansion projects, preparing for the future by investing $700 million to modernize its two primary container terminals. When all construction is complete in 2020, the Port will have expanded its annual throughput capacity by 40%, or 1 million container units. This expansion, combined with an effort to deepen the channels to 55 feet and widen them for two-way ultra-large container vessel traffic, will result in a safer, modern container terminal complex capable of handling the largest ships in the Atlantic trade. The Port has a clear path forward for continued growth, ensuring its Mid-Atlantic global gateway position for decades to come.”
Chip Louthan, SIOR Senior Vice President | Director, Industrial Brokerage
Capabilities:
The Port of Virginia manages four container terminals as well as the Virginia Inland Port located in Front Royal. The Port of Virginia has seven berths and 30 cranes, 27 of which are Post-Panamax ready.
Trade:
The Port of Virginia finished 2017 with nearly 2.3 million loaded containers handled — the Port’s highest level in a decade. The Port handles a much larger percent of loaded export volume compared with other major ports in the U.S. In 2017, 44.2% of the total loaded twenty-foot equivalent units (TEU) handled were for exports.
Top trading partners include China/Hong Kong, Germany, India, Japan and Italy. Top imports include medicine, motor vehicles, printers, furniture and toys. Top exports soybeans, motor vehicle parts, raw tobacco, wood and medical instruments.
Intermodal Transportation:
The Port of Virginia has one of the top intermodal rail services in the country. A full 33% of all goods entering and exiting the Port of Virginia are handled by rail — the highest percentage of any port on the East Coast. This gives the Port of Virginia a huge advantage in today’s supply chain that heavily relies on rail to get products to the end consumer quicker and more efficiently.
Two Class I railroads, CSX and Norfolk Southern, serve the Port via container transfer facilities at Virginia International Gateway and Norfolk International Terminals. These services are assisted by short line rail partners including the Norfolk and Portsmouth Belt Line and the Commonwealth Railway. The Port’s intermodal rail connections provide daily service to the Ohio Valley and the upper Midwest, and a new partner intermodal rail market in North Carolina bodes well for additional market penetration in the Southeastern U.S. via rail from the Port.
Real Estate Impact:
The Port of Virginia is a demand driver for many industrial markets in the Mid-Atlantic, with products expanding into the Midwest and across the Eastern Seaboard. The Port also serves the large, growing millennial population in Washington, D.C. The market that is reaping the most rewards from the Port of Virginia is the Shenandoah Valley. The Shenandoah Valley — which encompasses parts of Virginia, West Virginia and Maryland — offers a plethora of advantages including land available for development and proximity to the metro Washington, D.C., Baltimore and Ohio Valley population bases.
Vacancy rates in the Shenandoah Valley have been cut in half post-recession, finishing 2017 at 7%. While the market is only comprised of 92 million square feet of existing product, development remains strong with more than 1.5 million square feet completing construction and 2 million square feet in development. As the Port of Virginia continues to expand and surrounding inland ports prosper, fundamentals and development will continue in the valley for the foreseeable future.