Smooth Sailing: US Seaports Ride High On Economic Waves, Cargo Rebounds To Prepandemic Levels
Seaports are pivotal in bolstering the U.S. economy, facilitating the seamless movement of goods to consumers, supporting the export of products to global markets and sustaining millions of jobs.
The volume of goods passing through each port is tied to the demand for industrial real estate. In 2023, cargo volume rebounded to prepandemic levels, indicating a positive outlook for major U.S. seaports.
Global commercial real estate firm Cushman & Wakefield examined the top 11 U.S. seaports, analyzing the factors that influence container volume fundamentals to provide a forecast for 2024 and beyond.
Economic uncertainty, continued inflation, drought forcing ships to avoid the Panama Canal, rising industrial vacancy rates and decreased demand are likely to keep the volume ports handle lower than in previous years. The volume of cargo projected to be handled by the 11 ports this year is expected to be down 14% compared to 2022, according to Cushman & Wakefield.
Volume in some West Coast ports has decreased by more than 20% as worker strikes and union negotiations in 2023 diverted some cargo to East and Gulf Coast ports.
Deliveries of new industrial projects pushed the vacancy rate higher in each of the 11 markets surrounding the ports, but the overall rate ended the third quarter at 4.26% — 76 basis points below the national average of 5.02%.
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Take a look at the ports in the Cushman & Wakefield report.
Los Angeles
The Port of Los Angeles is the busiest container port in North America. It has 7,500 acres of land and water along 43 miles of waterfront and is home to 25 cargo terminals.
Greater Los Angeles — Los Angeles County, Orange County and the Inland Empire — had 1.7 billion square feet of industrial space at the end of the third quarter. It has the highest asking rates and lowest vacancy rates of any U.S. market.
Long Beach, California
Often called the "world's greenest container terminal," the Port of Long Beach is a major economic driver for the city, region and nation. The port handles cargo valued at $200 billion annually, and its loaded containers account for one-third of all cargo moving through California ports.
The port occupies 3,520 acres of land and 4,600 acres of water. It has 10 piers, 80 berths and 72 Post-Panamax gantry cranes. Its 22 shipping terminals include five break-bulk (automobiles, lumber, steel iron ore), six container, six dry bulk (petroleum coke, salt, gypsum, cement) and five liquid bulk (petroleum).
New York and New Jersey
The Port of New York and New Jersey is the busiest on the East Coast. Shippers have access to 62 million people within a 250-mile radius of the port and more than 4 billion square feet of warehouse space.
New Jersey's industrial recorded 4.9 million square feet of negative net absorption through the third quarter, but it was not nearly enough to offset the 25 million square feet of positive net absorption over the past two years. Construction deliveries totaled 7.7 million square feet, with another 10 million square feet under construction.
Savannah, Georgia
The fourth-largest seaport in North America and second-largest on the East Coast, the Port of Savannah ships to more than 160 countries.
The port drives much of the real estate activity in Savannah and throughout much of Georgia. The vacancy rate and absorption were strong and steady in the third quarter, although vacancy inched upward in the fourth quarter as multiple speculative buildings were completed.
Northwest Seaport Alliance, Washington
Cargo volume in 2023 dropped 12% below 2022 levels at the Ports of Seattle and Tacoma — jointly the Northwest Seaport Alliance — because of softening consumer demand and a shifting preference for ports on the East Coast and Gulf Coast.
New industrial supply pushed the vacancy rate up to 5.3%, but it's still a historically tight market. The supply/demand dynamic is expected to adjust as construction and deliveries slow.
Port of Virginia
The Port of Virginia is investing $1.4 billion on improvements, including a $450 million project to deepen the navigational channel to make it the only East Coast port allowing two-way ultra-large container vessel traffic. The port handled 3.7 million containers in 2022 — a record and an increase of 5.1% over 2021.
The port drives demand for many industrial markets in the Mid-Atlantic and serves a growing millennial population in Washington, D.C.
Houston
The Port of Houston is a major economic drive because of energy production, crude oil trade and increasing demand for chemicals produced throughout the region.
Houston's most active commercial real estate sector in 2023 continued to be the industrial market throughout 2023, when occupancy gains totaled 17.3 million square feet and new supply amounted to 29.5 million square feet as of the third quarter. About 24.8 million square feet of industrial space was under construction, compared to 2022's 29.5 million square feet at the end of the year.
Charleston, South Carolina
The Port of Charleston is South Carolina's biggest economic driver, supporting 1 in 9 jobs in the state. Port-supported jobs on average pay 34% more than the state's average wage.
The expansion of the port's capacity and ability to accommodate larger ships could increase imported goods, driving the need for nearby warehousing and distribution centers to handle higher cargo volumes. As the port grows, property values in the surrounding area could increase.
Oakland, California
The Port of Oakland is building for the future. It approved a $167.7 million capital budget for 2024, a 46% increase from the previous year, and allocated $245.2 million over the next five years to pay for electric infrastructure.
The port drives demand for warehouse product as e-commerce expands and life sciences, manufacturing and the food and beverage industries' sales and leasing activity increases.
Miami
The second-largest container port in Florida, PortMiami contributes about $43 billion and 334,000 jobs annually to the state's economy. The Port of Miami Tunnel is used by 23 million vehicles and is a direct link to the interstate highway system.
Miami-Dade's industrial sector has limited supply and low vacancy rates, which have pushed industrial rents up throughout the county. Developers are expected to deliver more than 8 million square feet of space in the next two years.
Jacksonville, Florida
The Port of Jacksonville, Florida's biggest container port by volume, is one of the top vehicle-handling ports in the country. It hit a high point in fiscal 2018-19 when tenants moved about 696,000 vehicles. That dropped to 553,000 in the past two years.
Jacksonville's industrial market continued to see strong leasing demand and rent growth during the third quarter of 2023. The supply remains relatively tight despite nearly 1.5 million square feet of deliveries in the last 12 months.
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