MIAMI-The buzz is mounting about the Panama Canal expansion. But how will the much-talked-about expansion really impact East Coast and Gulf ports? Will the changes alter the landscape for the distribution of goods in Florida?
GlobeSt.com caught up with Curtis D. Spencer, president of IMS Worldwide, Inc., who recently was the keynote speaker at Transwestern’s National Industrial Market Symposium, to get his take on the impact of the expanded Panama Canal.
GlobeSt.com: From a high level perspective, what’s your opinion as to the general impact on East and Gulf Coast ports resulting from the opening of the expanded Panama Canal in 2015?
Spencer: The expanded Panama Canal will allow larger ships to transit to East Coast and Gulf Coast ports. With larger discharges occurring at fewer ports, those ports selected will have to be able to process larger volumes of freight through their terminals and to extend their reach inland to markets now served by the smaller ships and ports that do not have the rail capability to reach key inland port destinations.
GlobeSt.com: How do you see these changes altering the landscape for the distribution of goods within the US and specifically Florida?
Spencer: With greater flexibility in which ports they use, companies may start to re-analyze the number and locations of their distribution centers, which will likely drive additional large distribution center projects in the U.S.’s southeast markets. In Florida, the new cargo patterns along with continued demographic growth will drive an increasing need for new industrial real estate. The availability of on-dock rail capacity at the Port of Miami may drive an increase in TEU volumes transiting through that port complex.
GlobeSt.com: In 2015, Port of Miami will be the only Florida and Gulf Coast port with 50-foot water depth. What is the impact of this on South Florida?
Spencer: In order for this to occur, it will be important for the Port of Miami to provide a flexible, seamless rail solution for the larger TEU and goods volumes that will need to transit inland to other markets throughout the US. The Port of Miami is served by Florida East Coast Railway which must connect to CSX or Norfolk Southern in order to reach the major consumption centers where freight will be routed.
This will be an important infrastructure arrangement that must be accommodated in order for the Port of Miami to effectively compete for the larger ships “first call” and the attending larger cargo discharges. South Florida will benefit by receiving cargo from the “first call” rotation, but in order to gain this spot in the rotation, there must be an accompanying strategy to assure the ocean carrier that the cargo can move inland at a competitive rate and pace.
GlobeSt.com: In major distribution markets, demand for industrial space has improved to the point that speculative development is returning. Much of the new construction is being developed with higher ceiling clear heights, better loading and trailer parking. Is this a natural evolution for bigger and better buildings, or a direct result of the post-Panamax ships?
Spencer: It is a combination of factors. Logistics operations are continuously looking at ways to drive efficiencies and squeeze every penny out of the supply chain. For many users, both truck and facility security are top priorities and dedicated truck courts are becoming more important as well. Many investors prefer higher clear heights and better loading from the perspective a preservation of building value.
GlobeSt.com: Miami has a new Foreign Trade Zone encompassing much of the northern half of the county through an Alternative Site Framework (ASF) grant. Can you tell us a little about what that means for trade and what impacts it might have on industrial real estate?
Spencer: Miami has been operating with an antiquated FTZ program in place over the last decade. However, with the new ASF project established, this market can now offer one of the nation’s most modern Zone projects. The development of this new Zone allows FTZ designated companies the ability to operate within the new Zone (and this can be in almost any industrial building in the county) and receive major benefit and cost saving advantages.
GlobeSt.com: In your view of international trade, what is your overall outlook for the economy and industrial real estate over the next 18 to 24 months?
Spencer: We are forecasting solid, steady growth with rental rates trending higher, but not spiking in the near future. With the vast amount of speculative building going on in most of the major, high demand markets, the availability of quality facilities will be a benefit to potential users.