Skip Ribbon Commands
Skip to main content

News release

CHICAGO

Docked and loaded: Five trends turning the tide of the North American shipping industry

Panama Canal expansion contributing to East and Gulf Coast industrial real estate boom


CHICAGO, Aug. 3, 2017 – Only a year after opening, the $5 billion Panama Canal Expansion Project is already having a profound impact on the North American shipping industry. A new report from JLL reveals that as a result, industrial real estate demand is stronger than ever. While West Coast port markets remain naturally competitive, demand is escalating around East and Gulf Coast ports.

To tackle this demand, nearly 25.4 million square feet of industrial real estate is under construction in the 14 port markets tracked in JLL's 2017 Seaport Outlook, and 65 percent is in East and Gulf Coast ports.

"While the West Coast still handles about half of all shipping volume, the East Coast is seeing significant growth," said Walter Kemmsies, Managing Director, Economist and Chief Strategist of JLL's Port, Airport and Global Infrastructure (PAGI) group. "The trans-Pacific trade lane is the largest in the U.S. by overall volume, so West Coast ports are still in high demand. But little room to build distribution centers near these ports, coupled with pressure to move cargo from the first to last mile, presents challenges for the future."

Since 2013, Mid-Atlantic and Southeastern seaports have seen a 20 percent hike in volumes compared to just 5 percent on the West Coast. Kemmsies attributes this growth to the expanded Panama Canal, increased trade with Asia, and importers progressively pursuing a four-corner strategy throughout the coasts for cost saving and risk control.

As the shipping industry continues to transform, JLL's new report identifies the five major trends impacting North American ports and their surrounding real estate:

  • Gulf Coast ports are winning the U.S. seaport trade wars. Thanks to the Panama Canal expansion and increased downstream demand in recent years, port volumes and industrial real estate demand are higher than ever in Gulf Coast ports. At Port Houston, for example, 20-foot equivalent unit (TEU) volumes increased from 4.6 percent to 5.2 percent of total U.S. TEU volumes from 2010 to 2017.
  • Mergers and alliances are causing uncertainty and changing the landscape of the shipping industry. The industry has shifted from four shipping alliances to three leading alliances which, combined, affect 90 percent of global trade routes. In the short term, these alliances disrupt the industry for tenants while helping carriers stay competitive and reduce costs. With a number of mergers still occurring, control and travel routes will continue to shift.
  • Larger ships are calling on U.S. ports, passing through the new Panama Canal. In advance of the opening of the Panama Canal, ocean carriers ordered larger vessels to deploy across all cargo types. To accommodate these vessels, U.S. ports led efforts to employ new cranes, dredge channels, have deeper berths and remove air draft restrictions. With larger vessels calling on ports, shipping liners are likely to reduce the number of port calls, which will only increase already fierce regional port competition.
  • Next-day deliveries and autonomous vehicles are bringing the trucking industry to new heights…with new challenges. E-commerce isn't going anywhere, and neither is its dependence on trucking. The trucking industry is using technology more than ever to increase efficiency from the first to last mile, but congestion on the roads is getting worse. The only true resolution is a complex, multi-year decision that would impede delivery times and increase operating costs. This provides opportunities for other intermodal sectors like rail to lessen the burden.
  • Rail needs to be nimble as competition from other transportation modes intensifies. Viewed by shippers as a cheaper, more environmentally sustainable alternative to trucking, the rail industry is expected to grow. With coal transportation waning, the industry is moving away from traditional cargo to being more nimble. Intermodal volumes have been a bright spot for railroads, accounting for over half of all railcar volumes. This is up from 40 percent just a decade ago.

"So far in 2017, all port markets across the U.S. have seen robust growth and increasing demand for industrial real estate," said Mark Levy, Executive Managing Director and leader of JLL's PAGI group. "West Coast ports such as Los Angeles, Long Beach and Seattle-Tacoma continue to have the highest occupancy rates of all the port markets. In turn, they command the highest rents for warehouse and distribution space in the U.S., but other markets are gaining momentum. Over the last two years, East Coast ports including New York/New Jersey and Jacksonville have seen the largest decline in vacancy rates."

The JLL PAGI Seaport Outlook 2017 details emerging shipping trends and provides a distinctive analysis of seaport-centric industrial space in 14 major North American port markets.

About JLL
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the second quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of nearly 80,000. As of June 30, 2017, LaSalle Investment Management had $57.6 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.