Where Asian shippers used to unload almost all goods destined for US markets on the West Coast for transfer to truck and rail, they now shuttle more ships through the Panama Canal to Gulf and East Coast ports. Statistics provided by the Intermodal Association of North America show that eastbound shipments of containers from the West Coast declined by 27% to the Northeast and 16% to the Southeast last year.

"The comparative advantage held by West Coast markets as import gateways to the US is being threatened by rising intermodal fees and increasingly stringent environmental regulations," says Stone Mortimer. "The East is gaining market share of the containerized import traffic as a result of faster vessels, which lower the transit time, and lower intermodal fares from the East and Southeast ports that are located in lucrative, population-rich markets."

Stone Mortimer says growing demand for warehouse space in Northeast port and distribution markets reveal how the region is benefiting from increased import traffic. She points out thatnet absorption rates for the Midwest, Southeast and Pacific regions slowed to roughly 1% last year, compared to 3% in 2006. By contrast, the Northeast's rate held steady at 1.9% over the past two years.

According to Stone Mortimer, large importers and retailers prefer to ship by water to the East Coast because it is cheaper than intermodal transport. However, they still favor West Coast ports combined with intermodal transport for time-sensitive merchandise and merchandise destined for the interior of the country.

"In the long-term, shifting trade flows will positively affect industrial space in the Northeast, creating sustained demand as a result of relative cost advantages and more available land than on the constrained West Coast," notes Stone Mortimer. "The expansion of the Panama Canal by 2014 will increase trade flows, largely to the advantage of East Coast. As a result, the Northeast warehouse sector should outperform warehouse sectors in other divisions during this time of uncertainty, experiencing falling availability and rental gains."

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Increased Shipping to East Coast Ports Benefits NE

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