The expansion of the Panama Canal is changing the shipping dynamic of the U.S. Eastern seaboard by permitting deeper ships to enter its ports. These Eastern ports may gain the competitive edge to challenge the supremacy of the West Coast ports for shipping more transit-equivalent units, the industry standard measurement for cargo container volume.
However, nearly two years since the renovated Panama Canal opened in June 2016, the changes are coming slowly. Larger ships are passing through the canal to U.S. East Coast ports. The total number of transits, however, was down by 0.2 percent last year, with 46.3 million 20-foot TEUs, according to CBRE. Ultimately, the growth in cargo will resume, and the increased competition between ports on the East and West Coasts will create more flexibility and alternatives for distribution and warehouse users.
“Like ships move slowly, shipping routes and port markets also tend to change slowly,” says Craig Roberts, CCIM, real estate project manager at Port Tampa Bay in Tampa, Fla. “We invested in Post-Panamax cranes for ships from the Panama Canal and are expanding our container capacity. Getting our infrastructure ready is the first step.”
The World Trade Organization forecasts up to 4 percent growth for shipments to and from the U.S. during 2018, driven by a sharp uptick in expected global gross domestic product growth. Currently, the West Coast claims a 52 percent share of U.S. TEU volume, which has declined from 54 percent in 2014 and from 57 percent in 2010.
Roberts expects Port Tampa Bay to experience growth in its TEU volume during the next 10 to 20 years due to the expansion of the Panama Canal and the growth in central Florida's Interstate 4 corridor. He anticipates more permanent residents will settle in the area, as well as more food and goods being needed to supply the tourism industry.
Plumbing Greater Depths
In JAXPORT in Jacksonville, Fla., crews are digging deeper into the St. John's River to increase its depth to 47 feet from 40 feet. Already, the port has the widest shipping channel in the Southeast U.S., which allows two ships to pass simultaneously.
Additionally, JAXPORT achieved record growth in containers, vehicles, and overall tonnage during fiscal year 2017. The port moved more than 1 million TEUs, a 7-percent increase compared to 2016, with nearly 40 percent of the containers coming from Asia.
“We anticipate the cargo volume will continue to increase,” says David Stubbs, CCIM, director of properties and environmental compliance at JAXPORT. “The deepening of our harbor will allow the number of containers to significantly increase. A great deal of cargo headed to the U.S. today and in the future would be most efficiently served through our port.”
Balancing Mixed-Use Properties
South of JAXPORT and east of Tampa on the Atlantic Ocean, Port Canaveral focuses on being a mixed-use port, encompassing cruise ships, cargos, and warehouses, as well as retail, parks, offices, an exhibit tower, marinas, and a medical center. While certain areas are restricted, much of the land is open to the public. Also, SpaceX and other aerospace companies vie for berth area and land to use as they unload rocket stages that will be refurbished and reused in future launches.
In the three years that Scott Shepard, CCIM, has headed up real estate at Port Canaveral, his focus has been on negotiating and rewriting leases for port tenants to bring them up to industry standards. “In addition to a newly completed 246,000 sf Class A warehouse, we have several build-to-suit projects underway that require regular coordination with port departments, environmental groups, and county officials,” says Shepard, director of real estate at the Canaveral Port Authority in Cape Canaveral, Fla. “Lease revenue can and should be an important focus of the port. The port's Board of Commissioners recently approved our strategic master plan for the overall vision of development for the port. The updated plan will be used to navigate the land use for the port's growth during the next 30 years.”
During the next decade, the Eastern seaports most likely will increase their percentage of global shipments in the race with the Western seaports. Infrastructure within the ports will play a significant role.
Port Call
by Sara S. Patterson
Working in commercial real estate at multiple ports around the U.S. is a hidden opportunity for which CCIMs are uniquely qualified. “While professionals with strong commercial real estate and investment backgrounds traditionally have not been on staff, these ports need commercial real estate
professionals who understand how to negotiate good leases and determine market rates,” says Scott Shepard, CCIM, director of real estate at Canaveral Port Authority in Cape Canaveral, Fla. “CCIM training concerning IRR and cash-flow analysis has been helpful with establishing market rates for tenants.
At JAXPORT in Jacksonville, Fla., David Stubbs, CCIM, brought a new perspective and way of looking at commercial real estate. “I questioned a lot of things done in the past and improved our leasing process,” says Stubbs, director of properties and environmental compliance. “CCIM
courses gave me a strong financial background to evaluate leases, especially large leases of different lease lengths, varying from 25 years to month-to-month.
“Every day in this job is different. I do appraisals, property purchases, and ROI calculations that I learned through CCIM.”
At Port Tampa Bay, Craig Roberts, CCIM, started his career in commercial real estate appraisal and then shifted to specializing in industrial properties. “The industrial property experience led to my position at the port,” says Roberts, real estate project manager since 2000 at
Port Tampa Bay in Tampa, Fla. “My CCIM training gave me the ability to explain ROI, cap rates, and market information to port executives, stakeholders, and our board members.”
For those CCIMs intrigued by working in ports, where dolphins, manatees, and even rockets are commonly spotted, Shepard advises them to learn about the maritime industry and ports to supplement their strong skills in negotiation, financial analysis, and market analysis. “I wish
that I learned about this job 20 years ago,” says Shepard, who has been working at Port Canaveral for three years.