Port markets continue to lead U.S. industrial real estate recovery
U.S. port markets are leading the nation's industrial market recovery, according Jones Lang LaSalle's annual Port, Airport and Global Infrastructure report.
According to report, overall vacancy rates at seaports have dropped to 8.5 percent from 9.9 percent. Vacancy rates for the overall industrial market stand at 9.7 percent. Vacancy rates were reduced as millions of square feet of space were absorbed in the past year bringing the average vacancy rate down 1.4 percent. The markets that will likely outperform in the coming years will be those with a strong manufacturing base that drives two-way traffic through ports in the form of parts and finished goods.
U.S. imports and exports totaled $316 billion in May, just under the all-time record set in July 2008, the report said, and the port industrial segment is benefiting from stronger warehouse demand propelled by this growing international trade activity.
The Port of Los Angeles and Long Beach lead the country based on cargo performance, investment plans and 20-foot equivalent volumes (TEU), as well as real estate fundamentals, according to the report. Plans for the Panama Canal expansion opening in 2015 also have boosted activity on the East Coast, including Charleston, New York/New Jersey and Miami. The Port of Baltimore showed the largest percentage gain year over year, with an 8.7 point jump to 82.5, the report said.
Growth is also being seen in markets with intermodal activity, going from sites within 10 miles of the ports, such as Savannah, GA to country interior intermodal cities such as Dallas, Chicago and Kansas City.
The report predicts that seaport real estate will continue to outperform the broader industrial real estate market as trade volumes continue to expand and the Panama Canal expansion allows more larger ships to call on U.S. ports and increases the demand for portside warehouse space.
The report also cites slow steaming and free-trade agreements as factors that will further increase trade and demand for industrial space. In addition, port and rail infrastructure investments are laying the foundation for increasing trade volume and growth over the years to come.