NEW YORK CITY-Cargo volumes at the Port of New York and New Jersey rose 16% in 2010, according to figures released by the Port Authority of New York and New Jersey earlier this week. The numbers reflect an increase from a depressed base—2009 represented a 15% year-over-year decline from the year prior, which itself showed flat growth—yet they also occur within a supply-constrained industrial market.

For example, in northern New Jersey, home to Port Newark and Port Elizabeth, no new industrial construction occurred last year, according to Colliers International. The New York metro area west of the Hudson, which contains 373 million square feet of industrial space, is among the largest US markets that added no supply over the preceding 12 months; just 83,000 square feet is under construction, Colliers says. In New York City and on Long Island, the fourth-quarter vacancy rate for industrial space was slightly more than 5%, or well below that for the office sector, according to Newmark Knight Frank.

In a late 2010 report, industrial REIT AMB Property Corp., which has since announced a merger with ProLogis, predicts the US availability rate to decline “faster than in previous recoveries as record low deliveries of new space have fallen below the rate of obsolescence. There has not been enough new space to replace that which is no longer usable by tenants today.”

These dynamics, AMB says in its report, will be “even more pronounced in our supply-constrained, infill markets,” such as the Port of New York and New Jersey. “Our data supports that these markets have been in recovery mode for three consecutive quarters. Increasing demand and limited new supply will drive vacancy rates down and lead to rent growth in some submarkets in 2011.”

During 2010, the Port of New York and New Jersey reported total container traffic of 5,292,020 loaded and empty TEUs (20-foot equivalent units), compared to 4,561,527 in ‘09. Imports grew 14.9% from the year prior, while exports rose 9%, according to the Port Authority. The authority calls this “an encouraging sign of growth,” but points out that the numbers “still have not risen to the peak cargo container traffic levels reported in 2007 before the global economic downturn.”

Long term, the Port Authority says it continues to project “modest annual cargo growth at the Port of New York and New Jersey,” and says it’s making “the necessary infrastructure investments to support that growth.” Currently, the port supports approximately 270,000 direct and indirect jobs in New York and New Jersey, more than $8.9 billion in personal income, more than $28.9 billion in business activity and more than $3.9 billion in tax revenues, according to a 2008 report by the New York Shipping Association.

The port handles 31% of the cargo on the East Coast, with about 20% of that cargo bound for regions outside the tristate area. “This discretionary cargo is part of a highly competitive market that every port in the USA and Canada seeks,” according to a release from the authority.

To help face that competition, the authority says it will invest $283 million this year to upgrade the port road network, enhance the existing ExpressRail system and continue its program to deepen the port’s channels to 50 feet. The latter is intended to help the port accommodate the larger ships that are expected to proliferate with the upgrade of the Panama Canal, as is a project to raise the roadbed of the Bayonne Bridge by more than 60 feet above the Kill van Kull between New Jersey and Staten Island. The authority says it’s begun engineering and design work on the Bayonne Bridge project, the cost of which has been estimated at $1 billion.