Ports Planned Well for Panama Canal Changes

Strasmann: “Long term, we anticipate approximately a 3% to 5% decrease in volume, mainly of lower-end goods that will be diverted through the Panama Canal to Gulf and East Coast ports.”

NEWPORT BEACH, CA—Bottom line is that the Long Beach/L.A. ports have done a great job at continuously reinvesting to provide operational efficiencies for the transportation of goods, CBRE ‘s senior managing director of Orange County operations Kurt Strasmann tells GlobeSt.com. A recent report from the firm showed that increased capacity of the Panama Canal will, in the long-term, result in more mega ships carrying Asian export cargo directly to the East Coast and that it will shift cargo delivery from slightly favoring the West Coast to a more even split between the two coasts. We spoke exclusively with Strasmann about how the West Coast ports might react to this shift in activity and how they could make up the potential shortfall. GlobeSt.com: How might the West Coast ports react to activity being more evenly split among the two coasts as a result of the expanded Panama Canal? Strasmann: The West Coast ports have been anticipating this for some time.  They have been and are making big investments into the operation efficiencies for vessels at the ports to unload as quickly as possible. The bigger the vessel, the more time it takes to offload the containers. The more port infrastructure a port has, the faster the offloading (terminals, cranes, rail, etc.), and this benefits the cargo owners. Bottom line is that the LB/LA ports have done a great job at continuously reinvesting to provide operational efficiencies for the transportation of goods. GlobeSt.com: How will the shortfall from the presumably decreased port load be handled on the West Coast? Strasmann: All ports are extremely competitive in their attempt to recruit and retain business. They compete directly against each other. There has been a trend for some time of East Coast and Gulf Coast ports increasing market share of cargo coming from Asia. It is our belief that much of this has already happened, with more volume coming via the Suez Canal to the East Coast ports (diversity of port of entry is a basic supply-chain strategy). Long term, we anticipate approximately a 3% to 5% decrease in volume, mainly of lower-end goods that will be diverted through the Panama Canal to Gulf and East Coast ports. In theory, port cargo volume will not grow as fast, and the new growth is spread out to multiple ports. GlobeSt.com: What opportunities does this open up for West Coast ports and/or markets? Strasmann: West Coast ports will always be critical for goods flowing into the USA. Dense populations surrounding our local ports (and growing), excellent business infrastructure and efficient transit modes via ports, rail and truck will always provide unique advantages. From a real estate standpoint, Southern California has some of the lowest industrial vacancy rates in the nation (L.A. has the lowest in the nation, and OC is the second lowest). The commercial real estate market and business fundamentals are excellent and superior relative to most other regions. GlobeSt.com: What else should our readers know about the Panama Canal’s impact on the West Coast? Strasmann: The latest/newest and biggest cargo container ships are too large to travel through the Panama Canal.  The most recent example of this type of ship is the Benjamin Franklin that came through Southern California recently; it can handle upwards of 18,000 TEUs.  In theory, the larger the ship, the more economical it is for the users. With developers leveraging development and redevelopment opportunities across all property types, how can you capitalize on this activity? Join us  at RealShare Orange County on August 16^th for impactful information from the leaders in Orange County CRE. Learn more .