Canal Widening Great for Port Hubs

PANAMA CITY, PANAMA-The $5.3 billion Panama Canal expansion, which will boost the current ship cargo-carrying capacity through the waterway locks by 300% when it opens in 2014, is expected to also create a demand for more industrial development at key port connections throughout the United States. Along with large ports such as Norfolk, VA and those in New Jersey, industrial hubs connected to ports will also likely see increased demand for warehouse properties, according to a recent study by Jones Lang LaSalle.

The expanded canal is supposed to open on Aug. 14, 2014, the 100th anniversary of the first opening day of the canal. Larger ships are expected to begin transiting almost immediately, and these ships, to be cost effective, will most likely be full, boosting the requirements for large ports all along the East Coast. John Carver, EVP of Port, Airport and Global Infrastructure with JLL, tells GlobeSt.com that big discussion this year is about which ports will be ready to handle the new traffic.

“US ports are discussing how important the canal is, and what it’s going to mean to the country’s supply chain,” he says. “There’s a lot more discussion on where ports, and port-connected communities, should place capital resources.”

Bigger ships going through the canal from the Pacific Ocean means much more goods are going to be hitting the East Coast than before, especially as companies hedge their bets by spreading out their shipping, to avoid crippling port strikes like the one that hit the Los Angeles/Long Beach area in 2002. Carver says the added shipping will also convince firms that shipping through the canal will get goods to some US cities faster.

“Traditionally, anything destined for cities east of Memphis, TN has been shipped through the canal, and goods for cities west of that point have been shipped to the West Coast. With the larger ships coming through, that pushes the line closer west, to about Dallas,” he says.

Ports such as those in Norfolk, New York, New Jersey and Miami are planning to accommodate the larger ships. More cargo coming in through those ports, however, is also going to boost the inward points along the chain, from the holding-area warehouse industrial centers that surround the major ports, to the shipping hubs leading inward through the country.

For example, large-scale industrial parks of about 1,500 acres are growing in areas like Savannah, Georgia. A rail line that connects Norfolk with Columbus, OH will also benefit, as will projects in the distribution belt south of Chicago, Carver says. “The demand for industrial property around these receiving ports both inland and coastal is surely to rise,” he says. “The canal expansion is causing companies in both port and inland markets to reexamine their logistics processes and facility positioning. “A competitive edge for many companies is becoming increasingly realized through effective supply chain management. We have seen the recent industrial real estate resurgence materialize by way of a ‘coast inward’ recovery. If anything, the expanded canal will give companies access to more options as they contemplate their supply chain strategies and post-2014 real estate requirements.”