The Port of Newark is among the East Coast ports seeing container traffic surge.
PHOTO: BLOOMBERG NEWS
Robbie Whelan | The Wall Street Journal
East Coast ports are falling behind on supplying warehouse space to meet booming container traffic, real estate brokerages say.
The expansion of the Panama Canal is reshaping seaports up and down the U.S. East Coast, as local governments spend billions to deepen harbors, raise bridges and make other infrastructure improvements in anticipation of larger ships. But data show that East Coast ports aren’t meeting demand in one key area: the supply of warehouse space at or around marine terminals.
According to data prepared for WSJ Logistics Report by real-estate brokerage CBRE Inc., the stock of warehouse space at or around major East Coast ports rose just 1.2% between 2012 and the end of 2014. Average availability – a statistic that measures the percentage of existing stock that is vacant or soon to be vacant – in those markets fell from 14.6% to 11.3% over the same period.
Port volumes, meanwhile, have surged to record highs on the East Coast. At the 11 biggest East Coast ports by volume, the number of TEUs — the equivalent of shipping containers — passing through the port grew 9.6% between 2013 and 2014, according to data provider Zepol. As of the end of June, volume had grown by 10.5% compared with the same year-to-date period in 2014, Zepol said. When the expanded Panama Canal opens – expected in April of next year – much larger ships will visit East Coast ports. The revamped canal is expected to be handle ships with as many as 18,000 TEUs. The largest ships that can visit East Coast ports today have slightly fewer than 10,000 containers, although ports are currently spending nearly $30 billion on infrastructure improvements to accommodate larger ships. Warehouse space, however, will be in even shorter supply once those larger ships arrive, the CBRE report said.
“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,” said Carla Lopez, head of research in Latin America for CBRE, in a written statement included in the report. In a separate report, brokerage JLL wrote that warehouses near the top U.S. seaports are “bursting with consumer goods and other cargo” and occupancy levels have reached historic highs, surpassing the top of the last real-estate boom in 2007. Dain Fedora, a JLL researcher and one of the report’s authors, said that most waterside distribution centers, especially in the port of New York and New Jersey, where the average warehouse is nearly 60 years old, are obsolete, but lack of land will drive future warehouse development further from the port.
“Most users are going to look further inland, because the space being marketed is outdated and not suitable for use today,” Mr. Fedora said.