Port Traffic Offers Hope for Industrial Market

On a local basis, roughly 47.7% of all port activity through Oakland in 2008 was driven by out-bound shipping (meaning exports), and this percentage appears to be climbing, according to the Colliers research. It contrasts ports that are dependent on exports with those that are chiefly dependent on imports, pointing out that the import-dependent ports have sustained the greatest vacancy hits.

Ken Meyersieck, senior vice president, for Colliers International's Oakland Office, explains some of the reasons for the promise of export growth: "The Bay Area is a knowledge based economy driven by technologies developed around UC Berkeley and Stanford. As these new technologies evolve they result in exports to virtually every country on the planet," he says.

Meyersieck sees the continued growth of export demand as a critically important factor for the Oakland industrial market, which has suffered along with all other markets during the downturn. The Colliers report notes that industrial markets in major port cities are still in the early stages of a recovery. As a sub-set of all US industrial markets, those located in or around major seaports have on average sustained occupancy declines that are greater than the nation as a whole, it points out. Of the eight US industrial markets that eked out marginal occupancy increases between 2007 and 2009, only one of these markets was a major US port (Houston).

Other observers of the Oakland industrial market also see signs of hope, albeit the market remains challenged. "The Oakland industrial market continued to experience rising vacancy and availability" during the first quarter, according to a report by CB Richard Ellis, although the pace of decline "began to slow considerably," CBRE says. Although the market posted negative net absorption for the seventh consecutive quarter, this quarter recorded the least amount of negative absorption since the trend began, according to CBRE.

The Colliers report underscores what a significant impact port activity can have on nearby industrial markets. "Between 2001 and 2007, containerized trade volumes increased by nearly 60% as the global economic boom triggered a wave of spending on US and foreign goods," the report states. "Demand for industrial space in these markets followed suit, driving occupancy up by roughly 20% during that periodfaster than any other US commercial real estate asset class.

The Colliers research regarding the Oakland port and its impact on the industrial market is part of a Port City Industrial Markets white paper that analyzes how maritime freight volumes impact occupancy rates in the nation's 10 largest container seaports and demonstrates how the global recession has vastly reconfigured US shipping and occupancy patterns between 2001 and 2009.