The US industrial real estate market in 2013 saw its biggest single-year growth since 2005, another positive indication that the worst of the economic downturn has passed.
Industrial leasing activity in 2013 increased 6.2% over 2012, reaching a total of 328.5 million square feet in leasing activity and 117.2 million square feet of positive absorption, according to recent reports.
Part of that increase could be related to expansion of US ports and the construction of distribution centers in anticipation of improvements to the Panama Canal that will be completed next year. When the $5.25 billion upgrade is completed, mega-sized cargo container ships, known as “Panamax” vessels, will be able to pass through the canal and dock at ports along East Coast and the Gulf of Mexico.
Industry Prepares for Increased Traffic
In preparation, port operators from Miami to Maine have been scrambling to complete the digging of deeper trenches to accommodate these larger ships and to improve their infrastructure to expand their capacities.
There also has been an increase in the construction of distribution centers to accommodate larger freight loads, as well as improvements to rail lines an an increase in federal spending on seaport infrastructure.
One analyst — B. Kelley Parker III, executive vice president of Cushman & Wakefield, in Texas — said industrial real estate improvements in his state have been fast and furious.
“The Port of Houston is growing by leaps and bounds,” Parker said. “Petrochemical exports are continuing to ramp up and inbound calls serving mega-retailers are higher than ever.”
Robert Phillips, the firm’s First Vice President, said he has seen similar growth at the Port of Virginia.
“The Richmond/Greensboro inland triangle develops industrial base and foreign trade zones,” Phillips said. “New port tax incentives and grants will also drive more business at the Port of Virginia.”
Another Cushman & Wakefield First VP, William Throne, said that while the region around the Port of Virgina is growing, it has not yet seen major players such as Walmart other “big box” retailers moving into the area. But they are poised and ready should those mega-retailers decide to build there.
“However, we do have a good supply of entitled and ready-to-go sites for distribution center development,” Throne said.
The nation of Panama voted by referendum to expand the 100-year-old canal in 2006. The canal will be deepened, widened and its locks and other facilities will be upgraded.
New Investment in Supply Chain Infrastructure
When completed, the canal will open the East Coast and Gulf ports to container ships from Asia and elsewhere with nearly triple the capacity. Up until now, these super-sized ships were limited to West Coast ports such as Long Beach, Portland, Seattle and Vancouver, which already have naturally deeper trenches to accommodate them.
The expanded trade capabilities are expected to have a profound influence on the US supply chain, spurring improvements on rail and barge transportation lines as well as construction of new distribution centers. In January, the US Congress passed a $1.1 trillion consolidated appropriations bill that funds several high-priority programs related to the nation’s supply chain infrastructure.