Port CRE To Improve with Increased Shipping Strength

CHICAGO-An increase in cargo volume in the past three quarters predicts a strong industrial market showing for port cities, according to the Ports, Airports and Global Infrastructure report recently released by Jones Lang LaSalle, based here. Transpacific US bound trade from Asia is boosting traffic on West Coast ports, and that will translate into a positive impact on the surrounding real estate economy, according to the report.

John Carver with JLL tells GlobeSt.com that there’s a direct parallel between container traffic and real estate market success for these port cities. Between 2007 and 2009, the nation’s top 13 ports saw an 18.5% decline in total volume as both domestic and foreign consumption waned, he says. “When volumes began to drop in 2007, 12 months later we began to see a downturn in the real estate markets of the port cities. This is a bell-whether for the industrial market strength,” he says.

Global financial issues have brought demand for warehouse and distribution space around ports to critically-low levels, according to the report. “Asking rents declined by an average 7.1%, with the largest losses in the markets surrounding the ports of Los Angeles, Long Beach, CA and Charleston, SC,” says Craig Meyer, managing director and head of JLL’s America’s industrial services team. “It’s no surprise that these three ports, along with Virginia and Tacoma, WA, posted the highest year-over-year losses from 2008 in total container volumes.”

However, Carver says that the top 13 ports will invest heavily in anticipation of economic strength, and will pour about $8.5 billion into container terminal and harbor dredging projects in the next five years. Container port handling is expected to grow by 6% annually starting in 2011, according to JLL. “Virtually every US port we’ve tracked has begun to show signs of improvement in terms of cargo volume,” Carver says. “That will translate into improved real estate economies.”

For example, he says the Los Angeles-Long Beach, CA area is on top of a scale that ranks areas by land value-to-lease ratio, local vacancy rates, labor costs, on or near dock service by rail, and planned infrastructure investment. The New York-New Jersey and Savannah, GA markets were next on the list, Carver says.

“There are great long-term opportunities on the horizon for port real estate leasing and investment,” Meyer says. These include the above markets, but also Gulfport, MS; Mobile, AL, Port Manatee, FL and Philadelphia, he says.