WASHINGTON: The Southeast’s top seaports and their surrounding industrial real estate markets have braced themselves for years for the larger post-Panamax vessels that can now pass through the newly expanded Panama Canal. The 102-year-old canal opened in late June 2016 following its $5.4 billion expansion, creating a shortcut for the larger ocean carriers coming from Asia.
The opening of Panama Canal’s expansion was delayed by two years, missing the 100-year anniversary of its 1914 debut. Shipping companies had their larger vessels in place, though, and decided to ship those vessels to the East Coast via the Suez Canal, according to Walter Kemmsies, managing director, economist and chief strategist of JLL’s U.S. Ports, Airports and Global Infrastructure Group. “As the Panama Canal gets through the learning curve, we’re seeing the number of weekly transits increase, and we’re still in that phase and perhaps will be for the next six months,” says Kemmsies, who is currently engaged with three of the top five seaports in the United States on their master plans. “The ocean carriers are starting to scrap their smaller vessels and moving their services back from the Suez Canal to go through the Panama Canal. Right now the East Coast has done quite well and had a pick up in volumes.” The Port of Savannah and Port of Virginia in Norfolk both enjoyed record shipping volumes in October. The Port of Savannah moved 251,566 TEUs (20-foot equivalent units) in October, setting an all-time record for activity for the month. The port moved 167,333 TEUs in November, a 6.5 percent increase in volume year-over-year. The Port of Virginia handled 238,567 TEUs in October, making it the single-busiest month in the port’s history. The port followed that up by handling 236,155 TEUs in November, its second-busiest month ever. “The fact that some of these ports recorded their highest volumes ever in October, despite relatively low economic growth in the U.S., tells you that some of the companies that moved over during the contract negotiations stayed on the East Coast permanently,” says Kemmsies in reference to the contract negotiations in 2014 and 2015 between the International Longshore and Warehouse Union and the Pacific Maritime Association, which caused major delays for the West Coast ports. During that time the East Coast and Gulf Coast ports took some of the market share from the West Coast ports.
The full extent of the Panama Canal’s expansion on the Southeast’s ports is yet to be seen, but industrial real estate professionals are confident it will ultimately be a boom for the region. “It’s a little too early to tell what the impact of the Panama Canal can be. Overall we feel that it’s beneficial to the East Coast port markets,” says P.J. Charlton, senior vice president of investments at CenterPoint Properties, an industrial investor and developer that primarily focuses on markets with either seaports or inland ports. CenterPoint Properties recently purchased a two-building, 511,302-square-foot industrial portfolio in Hanahan, S.C., near the North Charleston Terminal at the Port of Charleston. The Oak Brook, Ill.-based company is also developing a nearly 500,000-square-foot speculative facility within CenterPoint Intermodal Center in Savannah. “Industrial tenant demand is strong in all the Southeast port markets, particularly the ones we invest in,” says Charlton. “Rents are growing, and in many markets we’re approaching peak rents again, plus vacancy is low so overall it’s a very healthy time in our business right now.”
