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U.S. 2022 Ports Update

Dive into what is happening at the top U.S. ports, employment and trade volumes, industrial commercial real estate trends and what to watch in the months ahead.

Ports across the United States continued to face a variety of headwinds throughout the first half of 2022—from elevated dwell times for cargo ships and landside bottlenecks to chassis shortages. However, conditions appear to have eased from earlier in the year at many major ports.

  • Elevated dwell times for cargo ships persisted at many major ports—especially for those on the East Coast and the Gulf—resulting from some retailers fearing possible port slowdowns or work stoppages due to the West Coast port negotiations. Most East Coast and Gulf ports have been operating at capacity, which has pushed dwell times even higher in recent months as increased numbers of cargo ships arrived.

  • Landside bottlenecks have arisen in the first half of 2022 at some West Coast ports as well with increased dwell times for railcars which transport some of the imported cargo inland. As Asian imports remained strong, the lack of railcars at terminals kept goods from arriving at many destinations in a timely manner. At the Ports of Los Angeles and Long Beach, the number of rail containers has swelled by threefold since March, with some dwell times for the boxes exceeding nine days.

  • Continued chassis shortages have delayed moving goods out of the ports via truck to many key industrial markets further inland, such as Las Vegas, Phoenix, Kansas City, and Chicago. At the port of Oakland, for instance, many chassis have been stuck at local warehouses which are full and unable to accommodate the inbound cargo. The chassis shortage is also due to U.S.-imposed tariffs on Chinese-produced chassis, which account for the majority of chassis used here in the U.S. Despite attempts to increase chassis production by some U.S. suppliers, lead times can be up to one year from both international and local manufacturers. Also contributing to the global supply chain issues, some Chinese ports have had to shut down this year due to surges in COVID-19, which had delayed some U.S. inbound shipments and outbound empty containers. Earlier this year, almost 20% of all container ships were waiting outside of congested ports with 25% of those waiting outside of Chinese ports under lockdown. Although these ports have now reopened and most are fully operational again, the increased imports from these ports once again elevated wait times at many of the U.S. port terminals.


Employment is Down While Trade Volumes Are Up

While port-related employment rebounded after the sharp decline during the early stages of the COVID-19 pandemic, it is still 2.0% below its previous peak achieved towards the end of 2019 and early 2020. According to Moody's Analytics, there are approximately 159,000 jobs available nationwide in the water transportation and support activities for water transportation sectors, which is up 8.2% year-over-year.

Trade volumes through U.S. ports reached a record level in 2021 of $2.9 billion, a 21.6% increase compared to 2020, according to the U.S. Bureau of Economic Analysis. The 2020 volume, however, was tempered due in part to the pandemic. Some of the 2021 trade volume was likely due to pent-up demand, easily surpassing the previous record ($2.6 billion) registered in 2018. Despite continued supply chain issues, trade volumes thus far in 2022 have been robust and annualized with the total expected to surpass $3.5 billion by year-end, 22.2% higher than last year.


 

Top 10 Maritime Ports

Over the last few years, the top 10 maritime ports have accounted for approximately 85% of the total twenty-foot equivalent unit (TEU) volume handled throughout the U.S., which equates to some 27.2 million TEUs through the first six months of the year, a 5.2% increase year-over-year. Import volume at these ports totaled 13.4 million TEUs, up 7.9% from midyear 2021. Some ports such as Houston, Charleston, New York/New Jersey and Virginia posted strong annual gains in terms of volume handled. While some ports posted declines during the same period: the Port of Los Angeles yielded a 0.3% decrease in activity compared to midyear 2021 while Jacksonville and Oakland saw year-over-year volume down 9.6% and 5.5%, respectively. As some Asian imports were redirected away from West Coast ports, import volumes picked up some of the slack, with large increases at the Ports of Houston (+29.4%), Charleston (+21.2%), and NY/NJ (+12.4%). Imports continued to be fueled by China, which accounted for 17.0% of goods coming into the country through April, followed by Mexico (13.8%), and Canada (13.5%). Asia represents more than half of the imports received in the U.S.

While the Port of Los Angeles’ market share has declined modestly since the close of 2021 (20.2%) to 19.6%, the Ports of Long Beach and NY/NJ each saw its market share climb 40 basis points (bps) and 70 bps, respectively over the same period to 18.1% and 17.7%. West Coast ports accounted for 48.6% of cargo volume handled during the first half of 2022, down from 49.6% at year-end 2021. The decline was partially due to the diversion of cargo to East Coast and Gulf ports due to fears of slowdowns or work stoppages at West Coast ports.

Industrial Port Markets, Commercial Real Estate Trends

As increased port activity has persisted at most of the nation’s maritime ports, industrial demand has unsurprisingly followed suit. Port industrial markets have proven to be some of the strongest in the nation as they feed some of the country’s most populous metropolitan areas. The industrial markets surrounding the top 10 U.S. ports encompass over 4.0 billion square feet of space, representing about 25% of the national total. Many of the industrial markets around ports have experienced tighter market conditions than the U.S. overall, with seven boasting vacancy rates of 2.0% or lower as of midyear 2022, including the Inland Empire (0.6%), Savannah (0.6%), Los Angeles (1.0%) and New Jersey (2.0%). With an average vacancy rate of just 2.3%, the port markets’ absorption totals thus far in 2022 have lagged the U.S. average, only representing 1.1% of the total inventory. Only five of the major port industrial markets (Inland Empire, Charleston, Savannah, Hampton Roads, and Seattle) yielded more than 4.0 million square feet (msf) of absorption year-to-date, with just Savannah and Charleston seeing the totals account for over 5.0% of the inventory. All port markets, however, recorded net occupancy gains during the first half of the year.

With heightened demand throughout port markets coupled with limited supply, rents for space near and around ports continued to rise and have been priced at a premium over most other markets. At $12.09 per square foot (psf), the average asking rent for port markets finished Q2 44.7% over the U.S. average of $8.36 psf. Seven industrial markets close to major ports boasted double-digit rents as they are among the highest desired markets in the nation. In fact, industrial markets around the major cargo ports recorded six of the top 10 average asking rents in the nation for warehouse space. Taking rents for Class A logistics space in many cases were much higher, particularly within new construction projects in and around the ports. In New Jersey, taking rents have exceeded $20.00 psf in some cases and have even reached the $30.00 psf mark. On the West Coast, new developments in Los Angeles have garnered rents in the high $20.00s psf while the Inland Empire has seen some rents for new construction approach the $20.00 psf mark.

Since the start of 2022, industrial markets around ports have totaled 37.4 msf of new deliveries, accounting for just 1.0% of inventory and 19.3% of the U.S. total. Only Inland Empire, Houston and Savannah exceeded 5.0 msf of new product. As developable sites are limited in some of the major port markets such as New Jersey and the Greater Los Angeles region, the combined total for projects under construction of the top port markets was 142.0 msf at midyear, representing 20.3% of the nationwide total. However, the bulk of the new developments were concentrated in the Inland Empire, Houston and Savannah industrial markets, making up 61.8% of the total. These markets have more developable land than most other densely populated, more mature markets. Some developers and occupiers have been opting for facilities and sites further away from the actual ports due to lower pricing or more options.



What to Watch

  • The National Retail Federation (NRF) is projecting lower port volumes in the second half of 2022 as many retailers have stocked inventories early on in preparation for the holiday season. Also, as the economy is expected to slow, shipments are anticipated to follow suit.

  • The surge in empty containers will likely persist across some ports which should exacerbate congestion for cargo ships. This has been building up as import volumes have risen while exports have leveled off thus causing empty containers to account for a higher percentage of outbound containers.

  • The ongoing West Coast port negotiations have not yet had a substantial adverse effect on cargo shipments as a whole, but should these talks hit a stalemate and a slowdown or shutdown occur, the impacts could be felt by port operators and consumers across the country.

  • Although a potential strike by the nation’s two largest rail unions was tentatively averted with the help of a White House-brokered agreement, there is still concern the deal could potentially fall apart. A strike could halt intermodal service from some major ports to many key markets across the country. According to the Association of American Railroads, a potential strike could cost the U.S. economy approximately $2 billion daily.

  • Industrial port market fundamentals will remain strong this year as record-high rents, limited available space and strong absorption are projected to continue through the end of the year. However, a slowing economy, inflation, and supply chain issues could all temper growth expectations later this year and into 2023.
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