After the pandemic-fueled years of hyper-retail consumption, U.S. consumers appeared to curb their appetites for imports, at least somewhat, in 2023. Last year, the number of 20-foot equivalent unit containers (TEUs) unloaded at U.S. ports fell by 12% from the record year of 2022. The slowing activity was interrupted by a strong fourth quarter on the West Coast, especially in Long Beach. The nation’s second-largest port by TEU volume posted a year-over-year increase of nearly 23% for the quarter. Non-port markets — inland hubs not directly adjacent to seaports — experienced the most absorption of warehouse space.
Those are some of the findings in the CBRE’s latest report in its Port Watch Series. The Q4 2023 installment showed imports are in a stage of normalization, as conditions on the West Coast improve and cargo flowing through the Panama Canal has been slowed due to severe drought conditions. At the end of last year, the number of vessels going through the canal each day was down from 38 to 24.
The result is the shift of some shipping activity from East Coast ports back to West Coast ports as the nation’s imports trend toward pre-pandemic levels. Amanda Ortiz, director of U.S. industrial and logistics research at CBRE, spoke with Scotsman Guide in April about CBRE’s findings, U.S. port activity and how warehouse demand remains strong, especially in the Sun Belt.
Is the decline in container imports last year a shift toward normal port activity or is something larger going on, such a slowing economy?
From what I can see, I think that the volume really is kind of settling to around 2019 pre-pandemic levels. I think it’s just shifting away from the more inflated numbers that we experienced in 2021 and 2022. It’s more likely a shift towards normalcy rather than a drastic slowdown.
What do you expect for TEUs in 2024?
We may see some moderate growth from last year. I mean, we did have geopolitical factors to consider at the start of this year. Plus, there was the Francis Scott Key Bridge collapse in Baltimore, which will have an impact. So, I think we will still see some moderate growth of port activity and increased demand for space in those port markets. But it’s going to depend on the actual TEU volume in 2024.
With diversification of manufacturing moving to some Southeast Asian nations and India, will we see more activity in trade routes to the East Coast?
This diversification of sources is happening, but I think it’s happening very slowly. We’ve seen some increased movement in Vietnam and Thailand, but I think that the usual shipping lines [from Asia to the West Coast], for now, haven’t been replaced.
Which U.S. ports do you expect to continue expanding?
We had about 1.2 billion square feet of facilities that were added to the overall market in the last two years, and a lot of that space is now being delivered to the ports and is being subleased. We are still seeing some steady industrial activity and more than 1 million square feet leased in the first quarter of this year. In fact, first-quarter leasing was up a little bit over last year. So, I think we will see increased demand, especially in the second half of this year. I expect the demand for space to be in the major population centers, such as Houston, Miami and Phoenix.
Your report said that non-port markets had the most combined Q4 absorption, totaling more than 100 million square feet. Leading the way were Central Pennsylvania, Phoenix and Indianapolis. Where else are you seeing expansion?
Again, it’s where the population and economies are growing. I mentioned Nashville, which isn’t a port market, right? They are doing quite well. Other growing markets include North and South Carolina and Texas. We are seeing good population and economic growth in these areas, so I think that could lead to a further rise in industrial demand.
You mentioned Phoenix as a growth center. It is one of the largest inland port markets. Do you expect that area to continue expanding?
Absolutely. Phoenix is a really strong market right now and they have a lot of space still under development. There is a great deal of activity and leasing happening in this market. Developers are very optimistic about new companies coming in and occupiers are still deciding to move to the Phoenix area. So, I think Phoenix remains a hot market and is prime for more growth. ●
