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Are the U.S. seaports the secret gateway to decreasing deficit?

By Caroline Brooks | caroline.brooks@am.jll.com | @CarolineKBrooks

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United States seaports on the East and West coasts have are waging a heated battle for shipping supremacy, with East Coast shipping corridors recently making significant gains, according to JLL research. But while that struggle may be causing discomfort in the ports of Los Angeles and New York, among others, it appears to be a positive sign for the overall U.S. economy.

"Efficient supply chain networks have a degree of flexibility built into them, and, this is causing a cargo shift in how goods enter the country.

Dain Fedora,JLL's Research Manager, Americas Industrial

As reported by Reuters, ("Trade Deficit Hits Six-Month Low as Exports Rise"),  the U.S. trade deficit narrowed in July to its lowest point in six months as exports rose to a record high, supporting predictions of sturdy economic growth in the third quarter. To see the rise of U.S. exports in action, look no further than the ports.

While West Coast ports remain dominant in real estate development and investment, JLL's sixth annual Seaport Outlook shows rapid growth and demand for space in ports on the East Coast. This, according to the firm's Ports Airports and Global Infrastructure (PAGI) group, helped drive shipping volumes to a high last year.

Development activity in the ports isn't just a real-estate matter, though; it also provides a clear view into the evolving U.S. trade deficit. While much of the investment still is driven by strong imports, domestic manufacturers and shippers are also competing for space as they seek to grow their export businesses.

Dain Fedora, JLL's Research Manager, Americas Industrial, gives the real estate view:

"Efficient supply chain networks have a degree of flexibility built into them, and, this is causing a cargo shift in how goods enter the country. Namely, while West Coast seaports remain the primary entry point for goods from Asia entering the U.S., traffic is being increasingly diverted to Gulf/eastern complexes as a means to reduce gridlock and take into account potential disruptions, such as a port labor strike. This shift has not yet impacted the nation's biggest industrial markets, which are enjoying tightening market fundamentals characterized by declining vacancies, rising rents and speculative groundbreakings.

"Many eyes are on the Southeast however, which has lagged other industrial markets in its recovery. Atlanta, for instance, had a first quarter reminiscent of pre-recessionary levels and large blocks of warehouse space are dwindling; the Port of Savannah, currently the nation's fourth busiest cargo seaport largely influences Atlanta's industrial corridor. More imports means more demand for warehouse space. The Southeast is also a key manufacturing center, and heightened production is benefiting the nation's export figures; a notable example can be traced to BMW, which exports 250,000 cars through the Port of Charleston."

Read the full Reuters article here: Trade Deficit Hits Six-Month Low as Exports Rise
Download the full JLL report here: PAGI Seaport Outlook