A recent White Paper by Jones Lang LaSalle identifies three major trends resulting from the 2014 Panama Canal expansion for U.S. companies to consider when evaluating their logistics and supply chain options. According to the paper titled "The Panama Canal's impact on U.S. industrial real estate" the economies of scale resulting from the expansion is a global "game changer" in a world where companies stay competitive by operating the most cost-effective and efficient supply chains.
Jones Lang LaSalle predicts that the amount of growth and investment within the broader logistics universe will be exponential and will impact everything from shipping to rail line construction to warehousing and terminal development around the world. They also assert that the Canal expansion is driving three emerging trends in industrial real estate.
Oil price volatility and slow steaming will drive up demand for warehousing space
Higher fuel costs are driving slow steaming (slower delivery times through fuel conservation and slower shipping speeds) to reduce shipping costs. When the Canal expands, slow steaming these larger ships will result in a slower supply chain and the need for more inventory need on hand for manufacturers and retailers. As a result, additional warehousing space will be required by these companies, especially near ports.
Increased competition between ports
As larger vessels sail through the expanded Panama Canal, they are likely lead to fewer ports of call. Consequently, there will be winners and losers along the U.S. eastern seaboard. Currently, only the Port of Norfolk has the 50-foot draft depth necessary to accommodate the larger "post-Panamax" container ships; while the ports of New York/New Jersey and Miami have projects approved and/or underway to increase their depth by 2014.
High-value cargo will still likely come to the U.S. via the West Coast, but an expanded canal and cost efficiencies have the potential to shift the line for "discretionary" cargo within the U.S. This discretionary cargo, such as furniture and household products, could now reach the U.S. East Coast via all-water routes, and then be transloaded westwards to demand centers in the Midwest as far as Dallas. Increased container volumes through the new Panama Canal locks will drive ports to be more efficient, and put pressure on infrastructure and warehousing around ports.
Port diversification strategies
Shippers still recall the Los Angeles/Long Beach lockdown of 2002 and have since committed to diversification strategies that expand their options to alternative ports to mitigate their risk. This is giving a boost to East Coast ports such as Savannah and Charleston, which have the critical mass of port infrastructure, rail intermodal and population base to provide a safety valve for large U.S. retailers and logistics companies.