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Chicago

Shipping Industry Poised for Major Change Says Report by Jones Lang LaSalle

Firm’s PAGI report analyzes real estate surrounding transport hubs; recovery expected in 2011


CHICAGO, August 27, 2009 — While property fundamentals around U.S. ports have stagnated in response to a slowing economy, ports are undertaking massive capital investment plans to remain competitive once trade rebounds, says Jones Lang LaSalle in its Ports, Airports and Global Infrastructure (PAGI) report.  Key findings in the report, which examines real estate surrounding the nation’s transportation hubs, are that weak global trade flows have destabilized U.S. port growth and supply is outpacing demand in many markets.
 
“Fuelled by years of growth in containerized import and export traffic, many gateway markets in the U.S. expanded their inventory of logistics space at a frenetic pace,” said Craig Meyer, Managing Director and head of Jones Lang LaSalle’s Industrial practice.  “Once cargo volumes collapsed in 2007 and 2008, property fundamentals quickly deteriorated.”
 
“The global shipping industry has advanced profoundly in the last 15 years and ports across the nation have experienced double digit growth as a result.  Globalization and technology have driven new and more sophisticated supply chain operations and have spurred the seismic shift in how goods are transported across the planet, a modern day equivalent to the industrial revolution,” said Meyer. “Despite the global economic downturn, many U.S. ports are investing billions of dollars to position themselves for future strategic growth.”
 
The PAGI report describes the significant $5.25 billion expansion of the Panama Canal which will fundamentally alter global shipping patterns, allowing larger ships to pass through its locks.  With larger cargo shipments on the move, goods can reach the East Coast both easily and economically. This will spark competition amongst emerging ports on the East Coast as they vie for a permanent share of waterborne transpacific container traffic.
 
East Coast port markets with deep-draft channels and sufficient intermodal networks such as the Port of New York/New Jersey, Savannah and Virginia are poised to capture the greatest market share and this will rock the historical dominance of the West Coast ports
 
“Although West Coast ports have experienced the most severe declines in cargo volumes, they have not fallen victim to high vacancy rates owing to over development seen in other U.S. ports across the country,” said John Carver, Executive Vice President, Jones Lang LaSalle. “The Los Angeles/Long Beach market has remained relatively buoyant compared to the national average, but in markets such as Houston, Savannah and Jacksonville, supply has surpassed demand.   We expect a correction in the market to begin in 2011 and ports to regain their importance as major regional economic drivers.”
 
“Even as trade grows, the West Coast’s share of cargo traffic is likely to decline and we anticipate a greater percentage of traffic volume increase will be felt at East Coast ports as their market share continues to grow over the next 10-20 years,” Carver continued.
 
The Port of Los Angeles has the largest capacity at 7.8 million TEUs (Twenty foot equivalent units) and the highest asking rents at $7.58 per square foot.  The Port of Savannah and Port of Charleston have the highest vacancy rates, while the Port of Seattle and Long Beach have seen the largest year-on-year declines in cargo volume at -13.6 percent and -13.2 percent, respectively.
 
The PAGI report also analyzes the nation’s airports and has found that logistics space around the leading cargo hubs has proved stable compared with seaport markets.  With the exception of Dallas/Fort Worth, which has grown annually by 12 percent, most markets have not grown significantly in the last three years. Vacancy rates in Dallas/Fort Worth, however, are currently the highest in the country at 15.7 percent, followed by Atlanta, Indianapolis and Chicago O’Hare. The highest asking rents are found at LAX at $11.67 per square foot and New York’s JFK at $11.58 per square foot, while the largest declines in cargo tonnage year on year were seen at Anchorage, at -15 percent, while Chicago O’Hare follows at -13.5 percent.
 
“Official figures from the Air Transport Association of America paint a bleak picture with a 22 percent year-on-year cargo volume decrease in April 2009 based on revenue ton-miles, the ninth consecutive month of annual declines,” said Craig Meyer.  “With revenues collapsing under the weight of the global economic conditions, many air freight carriers are cutting capacity.  Again, as with the seaport industrial real estate market, we do expect to see signs of recovery set for 2011.”
 
About the PAGI report
 
The Port, Airport and Global Infrastructure report provides a detailed analysis of the current and future impact of economic development initiatives, cargo volumes, trade flows and shipping patterns on industrial real estate surrounding the nation’s top seaports and airports.  This is one of the only reports of its kind – drawing together trends in trade, supply chains and industrial real estate.
 
About Jones Lang LaSalle Industrial
 
Through offices across the globe, the Jones Lang LaSalle Logistics and Industrial Services team assist both real estate occupiers and investors in all the primary and secondary markets across the world.  The firm’s industrial professionals offer real estate expertise in the disposition and acquisition of industrial properties and portfolios, including manufacturing, assembly, research and development, high tech, food processing, warehousing, distribution and logistics facilities.  In addition, Jones Lang LaSalle's port, airport and global infrastructure experts bring insider knowledge of trends, issues and opportunities surrounding seaport and airport developments around the world. Working alongside Jones Lang LaSalle colleagues in such fields as supply chain & logistics, public institutions, capital markets, international business, project development services and integrated facilities management, the firm is setting new standards for real estate advisory to stakeholders involved in the local, regional and global movement of cargo and passengers.
 
About Jones Lang LaSalle
 
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.4 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $46 billion of assets under management. For further information, please visit our Web site, www.joneslanglasalle.com.
 
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