The Southeast's $5.25B Question

MIAMI—It's a milestone that will have a major impact on the global trade industry—and especially the way cargo is handled and transported across North America. Of course, I'm talking about the Panama Canal Expansion Project, the first major renovation the canal has seen since opening in 1914.

Scheduled to open in April 2016, the $5.25 billion expansion will accommodate a new line of Post-Panamax vessels—supertankers, container and passenger ships too large to pass through the canal before the expansion. Carla Lopez, head of research in Latin America for CBRE, says, “Now you can have these massive ships go directly to the East Coast, and that is going to drastically change the way merchandise is distributed.”

The American Association of Port Authorities (AAPA) estimates ports and their private sector partners are investing over $9 billion a year to modernize and expand port facilities. The AAPA estimates there are 125 port-related infrastructure projects underway or planned, cumulatively valued at $29 billion.

Indeed, ports on the East Coast are spending billions to deepen their harbors, increase their bridge heights, and transform their infrastructure to accommodate larger vessels that bring with them more cargo and potentially more business. But how immediately this influx of new business—in the form of cargo shipped from Asia directly to the East Coast—will land in the reconfigured ports is still a matter of debate.

Ports in Savannah, Georgia, and Jacksonville, Florida, are currently undergoing costly dredging projects to deepen their harbors for these larger ships. Georgia, for example, has set aside $266 million for the Savannah Harbor.

“I still think there are some limitations, like the Port of Savannah, which only has a certain depth that can be achieved there,” says David Egan, CBRE's head of industrial research in the Americas. Perceived limitations aside, the Port of Savannah has seen a bump in total TEU volume from March 2014 to March 2015, according to CBRE Research. This volume helped the Port of Savannah surpass the Northwest Seaport Alliance, a newly formed alliance between the ports of Seattle and Tacoma, as the fourth-largest port in total TEU volume.

Then there's the question of how those along the supply chain—from existing shippers to retailers—are going to change their methodology based on these new access points for larger ships. “If you're looking at an Asia-to-North America shipping lane and you're an existing retailer, how quickly can you turn on a dime and change your supply chain in order to take into consideration this new opportunity?” asks Scott Marshall, executive managing director, industrial services in the Americas for CBRE. “By changing that, what happens to your turn time?”