has already occurred since the
2005–2007 peak.
Spencer says share losses will be
capped by the ports’ favorable geographic proximity to Asian production centers and the ability of railroads serving the Los Angeles basin
to slash intermodal rates to discourage cargo diversion.
“The Western railroads will lower
their rates in an instant if they see
market share erosion get to 10 percent,” Spencer says. He adds, however, that the ports are unlikely to ever
recapture the tonnage diverted elsewhere.
Port officials say they don’t expect
to lose much additional business
due to the canal expansion, noting
that some large retailers have
already added distribution centers
on the East Coast that could be fed
by the canal.
“If retailers have the need to send
goods all-water, they’re most likely
already doing so today and don’t
need to wait for the larger ships,”
says Rachel Campbell, a spokeswoman for the Port of Los Angeles.
Campbell says the lower per-unit
costs of an all-water movement
through an expanded canal could
be offset by the higher tolls that
could be imposed on operators of
the larger vessels. “How much diversion occurs will still depend on rates
and service times,” she says.
APL, the container shipping and
logistics giant, shares the same wait-and-see attitude. As spokesman
Mike Zampa puts it: “Some cargo
diversion is likely. But it’s difficult to
say what the level of activity will be.”
Zampa says any shifts in tonnage
will depend on market conditions,
port and rail pricing strategies, and
the “ability of East and Gulf coast
ports to accommodate the larger vessels that will transit the Panama Canal
after expansion.” The ports’ capability
to handle the biggest of those ships remains
an open question. Currently, Los
Angeles/Long Beach, Norfolk, Va., and
Mexico’s Lázaro Cardenas are the only North
American ports with drafts of 50 feet or deeper. The Port of New York & New Jersey and
the Port of Mobile, Ala., have tapped the public markets for financing to pay for berth
widening and deepening projects.
;;;;;;; ;;;;;;;;
;;;!;;;;;;;;; ;;; ;; ;;;;;;; ; ;;" ;;;#;; ;;;;; ;;;;; ;;;;; ;;;;;;;;#
;"! ; ;;;;;;;;; ;;;;;;;;;;;;;;; ;;;;;
; ; ;;;;;;;;;;;; ;;;;;; ;;;;;!;;;;;!;;;
; ;;;;;;;; ;;;;;;;; ;;;;;;;;;;;;;;; ;
; ; ;;;;;;;; ;; !;;;;;;;;;;;
;;;;;; ;;;;;;;;;;;;; '&%$###$"! ;;;'&%$###$ %%;;$$$#"! ;#;;;
;;;;;;;; ;
;;;;;;;
; ;;;
;;;;;;;;;;;; ;;;;;;
; ;;;;;;;;; ;;;;;; ;;;!;;;;;;;
; ;; ;;;;; ;;;;;;;;;;;;;;;;;;;;
; ;;;;!;;;;;;;;;;;;;;;;;;;;;;;;;
;;;;;;;;;;;;;;; ;;;;;;;; ;
A ripple effect
Any shift in traffic patterns is likely to have
a knock-on effect on the industrial properties that surround the nation’s ports. A flurry of building during boom times has led to
a glut of industrial space around seaports,
according to the Jones Lang LaSalle report.
The firm cites Houston, Jacksonville, Fla.,
and Savannah, Ga., as three of the markets
where space is especially abundant.
Spencer of IMS Worldwide doesn’t see
much oversupply of warehousing and distribution center space around seaport facilities. However, he acknowledges that market share erosion at Los Angeles and Long
Beach is likely to put pricing pressure on
the facilities that surround the ports.
It appears some markets are already feeling the pressure. John Talhelm, head of
JLL’s Houston office, says oversupply at
Houston has “shifted the leverage to the
tenant,” with creditworthy businesses able
to negotiate perks ranging from free rent to
substantial improvements to the property.
In northern New Jersey, an abundance of
industrial space surrounding the Port of
New York & New Jersey has created “
wonderful opportunities” for importers,
exporters, and 3PLs seeking to snatch up
prime real estate at reasonable prices,
according to Stephen F. Blau, director of
corporate services for NAI Mertz, an industrial property developer in Mt. Laurel, N.J.
Still, there seems to be an allure to waterfront property that has historically insulated it from market fluctuations. Blau cites
the example of New York City’s Manhattan
waterfront, once ringed by docks and
warehouses but now home to high-end
residential and commercial development.
“We live in a world in which yesterday’s
sweat shops are today’s trendy loft apartments,” he says. “Although the use may
change, there will always be demand for
waterfront properties.”
