U.S. Seaport Outlook 2012 Port, Airport & Global Infrastructure (PAGI) U.S. seaport markets providing safe harbor in turbulent global waters Commercial real estate near major U.S. seaports continues to outperform the broader industrial market. Additionally, the tightness of these markets is funneling demand to inland distribution hubs with strong trucking and rail connections. Competition among U.S. seaports continues to increase for inbound container market in the midst of an expanding Panama Canal. Larger ships are already calling on U.S. ports. The increasing flow of containers is providing opportunities by matching empty boxes with export users. Demand for modern facilities provides huge upside opportunities for developers and near-dock land holders to reposition or redevelop existing assets. 3 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 4 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 In this report The Jones Lang LaSalle Port, U.S. Seaport Market Outlook provides a distinctive analysis of seaport- and airport-centric industrial space in gateway U.S. real estate markets. Observing the influence of global economic drivers, including trade and cargo flows, socioeconomic and political factors, as well as port capacity and infrastructure investment, it provides both a macro overview of current trends impacting the domestic sector in addition to detailed information on major seaports and airports. This report explores warehouse property fundamentals in a 15-mile radius from seaports, given a minimum building size of 50,000 square feet. Key takeaways 5 Emerging North American ports 18 Port of Baltimore 33 Ports battle supremacy in container game 6 Seaport property clock 20 Port of Houston 35 2012 PAGI Index Score methodology 8 Select top U.S. seaports and property market indicators 21 Port of Tacoma 37 Trends that shape global trade 9 Port of New York / New Jersey 23 Port of Virginia 39 Exports: An untapped opportunity for industrial real estate? 10 Port of New York / New Jersey 24 Port of Charleston 41 Trends that shape global trade (continued) 11 Port of Los Angeles 25 Port of Oakland 43 What’s happening in Panama? 14 Port of Long Beach 27 Port of Seattle 45 Seaport and airport connectivity 15 Port of Savannah 29 Port of Miami 47 China dominates global container growth 17 Port of Jacksonville 31 Port, Airport & Global Infrastructure report authors 49 Port, Airport & Global Infrastructure services Industrial and Logistics services Transportation hubs evolve and grow as fast as the world turns. Emerging populations and shifting From manufacturing plants to distribution centers, industrial real estate is at the backbone of the patterns in the global movement of goods and cargo have accelerated new trends in logistics, global economy. Today’s financial and competitive pressures demand that industrial property— technology, transportation and security. Plus, the demand for worldwide shipping environmental whether leased or owned—deliver maximum flexibility and efficiency. Our logistics and industrial sustainability will only continue to grow. All of which magnifies the importance of real estate to professionals understand the current business environment and offer innovative, profitable strategies international distribution channels, and dictates that yesterday’s approaches won’t solve for supply chain optimization, site selection, sales, leasing, acquisition, financing, construction, tomorrow’s challenges. project management, and property and facility management. Our experienced team of aviation and maritime real estate experts draw upon deep, real- Our experts know all the issues that impact industrial real estate decisions and apply proven best time knowledge of the trends, challenges and opportunities surrounding seaport and airport practices to address such challenges as skyrocketing energy, transportation, and labor costs; infrastructure and their connectivity to the real estate equation. Working alongside the firm’s heightened security needs; environmental requirements; and profound changes in global supply integrated service lines, our Port, Airport & Global Infrastructure practice brings leadership, strategic chains. Because of our depth of in-house talent, we can quickly assemble the right team. Regardless relationships and service excellence to port and airport interests worldwide. of the size and scope of the assignment, you’ll have a single point of contact who manages all service delivery and is responsible for producing the measurable results that are agreed to up front. 5 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Key takeaways • New score methodology: Our improved PAGI score methodology has revealed a shake-up at the top. The top three are still the same ports, but the Port of New York/New Jersey now leads Los Angeles and Long Beach. • Three tiers of ports: The new scores have also revealed an underlying distribution of ports in three distinct tiers. The top two tiers have three ports each whereas the last contains an additional seven ports. • Exports creating opportunities: Now at an all-time high for the United States, exports have become an increasingly important driver of activity at domestic ports and their surrounding real estate markets. • East coast prepares for Panama: East coast ports continue to make progress in preparing for the opening of the new set of locks at the Panama Canal, now set to be completed in 2015. • Investment pours into ports: Despite the uncertain macro environment, ports have continued to invest heavily in infrastructure improvements. At least $13 billion of public investment is flowing into ports over the next decade. These improvements will expand capacity and increase efficiency. • New transshipment hub for Panama: The new port being constructed at Colon on the Atlantic side of the Panama Canal is poised to quickly jump into the ranks of the world’s most crucial transshipment hubs. • Limited options for large space users: Large blocks of space are disappearing from port markets. A mere nine spaces can house a tenant of greater than 500,000 square feet within 15 miles of any major seaport. Only 20 blocks are available for tenants needing at least 250,000 square feet within five miles of a major port. • Leverage changes hands in seaport markets: Overall, the seaport markets continue to lead the broader industrial real estate market, but some individual ports have now slipped. Notably, momentum has slowed near the Los Angeles and Long Beach ports while Jacksonville, Miami, Seattle and Tacoma have swung significantly into landlord- favorable territory. • East coast has vacancy to burn: East coast ports such as Savannah, Charleston, Jacksonville and Baltimore have higher vacancy in their surrounding port markets, but they are also the fastest growing over the last 18 months. We expect development to remain cautious as these markets continue to tighten over the coming quarters. 6 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Ports battle supremacy in container game A new dynamic describes port-centric industrial real estate, one that highlights key differences in Vacancy remains higher in port submarkets that overbuilt before the recession. Many port how each market is currently faring in its recovery cycle and how each market will be positioned markets that experienced significant ‘big box’ development prior to the downturn have not yet in the years to come. Competition for market share of inbound global shipping will remain been able to burn off much of their excess construction. Houston, Charleston, Savannah and fierce, whereas an opportunity is emerging for increased containerized export traffic. Strategic Jacksonville all have double-digit vacancy. capital investments in seaport infrastructure have a direct relationship between the port and surrounding off-dock warehouse and distribution product. They also help determine the potential for In general for the major U.S. seaports, the industrial real estate within a five-mile radius of the port development over the long-term future. complex is at least 5.8 years older than that situated within a 15-mile radius, and this ratio goes up in the markets with higher vacancy levels. Despite differing layers of connections between port throughput and leasing or development fundamentals, most of the prime industrial real estate in the seaport trade areas continues to The land constraints that plagued some of the larger, established container port markets prevented outperform the industrial real estate market in general. overbuilding or redevelopment, whereas much of the newer development that occurred in other markets was sprung up from increased demand for more modern distribution space with higher Differentiation rising among ports clear heights and more efficient dock configurations The warehouse and distribution sector bordering America’s largest seaports, the networks of Los Angeles and Long Beach on the west coast and New York / New Jersey in the east, both The three largest seaports dominate both shipping and property variables service considerable super-regional populations, and remain two of the tightest property markets in 120 Shipping Metrics the study. New York / New Jersey Some cities with strong demographics and a sizeable consumer base within a 24-hour trucking window, markets like Seattle and the San Francisco Bay Area, have maintained strength within 100 Los Angeles their entrenched port-related logistics sectors. Similarly, others that are competitive shipping destinations, such as Houston, Miami and Baltimore, are moving to re-establish more solid leasing and investment fundamentals. Lastly, ports that may not benefit from immediately large populations Long Beach remain important throughput nodes to move goods and materials into other parts of the country. Virginia Savannah 80 Charleston Oakland Tight, established infill warehouse product aligns with tight, substantial distribution hub Seattle Jacksonville markets. Many cities have built up around their ports, leaving less developable land for Tacoma Baltimore large-footprint warehouses or distribution centers, constricting the flow of transportation Miami Houston infrastructure and making redevelopment more costly. Yet the strongest port-centric 60 markets in the United States in 2012 also profit from a connection to a region that facilitates ‘big-box’ logistics real estate. The Ports of Los Angeles and Long Beach have the Inland Empire; New York / New Jersey has the Exit 8A & 7A submarkets; and Seattle and Tacoma have the Kent Valley- all of these have tight vacancy, generally under 5.0 percent. 40 20 40 60 80 100 Commercial Real Estate Metrics Source: Jones Lang LaSalle 7 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 With few large available blocks of space, where are ‘big-box’ users to go? There are less than ten existing warehouse or distribution availabilities over 500,000 square feet in a 15-mile radius surrounding the major seaports in our study, and less than 60 blocks greater than 250,000 square feet. For large users in markets like South California or the Northeast, that most certainly means transporting cargo to inland destinations or bidding against other occupiers for space. This not only provides opportunities to develop smaller distribution centers or redevelop aged or obsolete product, but also to evaluate supply chain requirements, adapt potential transportation routes, and assess competitive drayage options. Markets like Savannah, Jacksonville which were overbuilt prior to the recession still have large blocks ready for users. These blocks could attract new shippers and buoy these two fast growing ports. While containers will continue to flow to where shippers can achieve the lowest overall cost and highest level of service, more than ever factors other than labor, real-estate and drayage costs are being considered. Redundancy is a virtue in supply-chain networks, especially considering the possible longshoremen’s strike at east and gulf coast ports. Just the west coast port strike years ago had short and long-term effects, so could this one. Already, firms are making arrangements to secure containers and land-side truck / rail capacity to move their goods to distribution centers in preparation for the peak shopping season. Any short-term diversion of cargo could have a lasting effect as shippers learn new ways to get their goods to stores. Competition benefits consumers and economy The dynamics of capacity, labor, service levels, taxes and more are driving fierce competition among the ports. Every action provokes a reaction, and no one is sitting on their hands. When the Panama Canal’s new locks open, do not expect west coast ports and rail operators to wave the white flag. And they should not, with their built in advantages they can make a strong case to shippers. All this competition is good for American consumers and it is good for trade which continues to grow, even in a weak global economy, and will continue to add to our prosperity. 8 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 2012 PAGI Index Score methodology The PAGI score was created to provide a quick snapshot of US seaports from the vantage point of The terminal operating metrics are designed to capture the health and growth of the ports as the real estate stakeholder - those who invest in, develop or occupy industrial property in port- well as their functionality and connectivity. Our measures quantify the total volume of containers, centric locations. short- and long-term growth in volume, rail connectivity, labor flexibility, lines of service and post- Panamax readiness. The winner in this category is the port of New York/New Jersey thanks to its We based the index on 25 measurable performance metrics, divided into two major categories: very large and quickly growing container volume, its excellent rail connectivity (service from 3 class terminal operating factors and the corresponding real estate market factors. The resulting index I operators) and its near-term plans for post-Panamax readiness. Los Angeles falls shortly behind score is then a combination of the performance indicators, providing a subjective measure of a New York/New Jersey while Long Beach, Savannah, and Virginia round out the top tier. port’s value to Jones Lang LaSalle clients and their customers. To produce our final JLL Seaport Index score the two components are weighted then combined. The real estate metrics taken into consideration include the total amount of industrial real estate This year’s highest ranked port is New York/New Jersey at 114.2. Los Angeles and Long Beach stock, the age of the inventory, vacancy rates and availability of suitable blocks of space within 5, are nearly tied with scores of 112.1 and 109.1 respectively. The remaining ports fall neatly into two 15 and 50 miles of each port. The highest real estate scores go to the ports which have a healthy distinct tier groups. supply of modern stock, low vacancy, but with still plenty of options for port related users to lease or buy. This year, the highest score belongs to Los Angeles and Long Beach, with their dense and dynamic markets just a short drive from the terminals. The Port of New York/New Jersey is not far behind. Together, the 3 ports are well ahead of their closest competitors. 114.2 112.1 109.1 120 100 85.8 81.3 78.1 72.4 80 66.5 66.0 65.1 64.7 64.6 63.4 60 40 New York/ Los Angeles Long Beach Savannah Jacksonville Baltimore Houston Tacoma Virginia Charleston Oakland Seattle Miami New Jersey 9 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Trends that shape global trade Seaport-related industrial real estate markets in the United States are navigating cautiously through More consumers are spread around the world a choppy, global economic recovery. Influenced by a constantly evolving maritime logistics industry Broad changes in manufacturing and consumption are affecting all aspects of trade, having and current events played out on a world stage, stakeholders, including developers, logistics far reaching implications on the flow of goods to and from port cities. Brazil, India and China operators and shippers, are optimistic in the short term. Long-term prospects remain positive as are expected to dramatically increase their economic influence over the long run. Many other millions join the middle class and mature nations slowly heal from recessionary pressures. economies in Asia are booming as well. Trade between these developing nations and the United States is shifting to accommodate. Exports of goods to China alone have nearly quadrupled in the Tenants currently in the market for industrial space are cautious and less willing to sign in long- last decade. In June, the Export-Import Bank announced that the United States exported $185 term leases. Flexibility in lease terms to minimize obligations beyond five years has been become billion in goods and services, an all-time high edging out the $184.4 billion recorded in March. more common, especially for third party providers. Tenants are demanding new or redeveloped construction which incorporates energy and operational efficiencies. This provides huge upside opportunities for developers and near-dock landholders to reposition under-utilized sites or modernize in the areas immediately surrounding major U.S. seaports. Firms seeking to offset increases in supply chain costs, do so not only by reducing real estate operating expenses, but also leveraging automation to reduce labor and optimizing transportation strategies – all factors which play into site selection and facility design. Correspondingly, the push toward Class A facilities has thinned out the available inventory across major markets, and is especially marked in dense or infill port-related submarkets. Critical variables affecting ocean-going cargo in 2013 • Fiscal & geopolitical uncertainty, both in the United States and abroad • Potential upward shifts or spikes in fuel and energy prices • Carrier capacity and rate structure flexibility • A shift toward larger container vessels • Risk mitigation and a geographic diversification of production 10 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Exports: An untapped opportunity for industrial real estate? Until recently, real estate interests addressing the growth of global containerized shipping in the The role of inland port development grows United States were predominantly focused on development solutions catering to import traffic. Helping match outbound cargo with inbound containers is stimulating activity at many U.S. Containers would arrive at major seaports, get stacked onto rail or drayed to a transload location inland ports. These hubs are being designed to transload and transship both international for movement by truck, and many would eventually be moved to the center of the country and and domestic shipments more effectively between maritime ports and locations within the U.S. emptied. This has resulted in a growing issue within the maritime industry as to how to handle heartland. Inland ports, connected by dedicated rail lines to one or more “sister” seaports, the concentration of empty ocean containers, countless numbers of which end up hundreds of provide a means for inbound and outbound ocean cargo to pass through congested waterfront miles from the waterfront, only to be returned empty. terminals more quickly and cost effectively. Greater profitability for developers, investors and communities For those developments that can create demand for back-haul containers, they will find The increased attention on exporting of U.S. goods can and will provide a timely opportunity to themselves much better positioned to attract traditional warehouse and distribution centers. For change this dynamic. For developers, investors and communities able to address the exporting large importers such as major retailers, the ability to find local demand for their empty containers of U.S. cargo, they will find greater ability to attract traditional distribution centers and third party may prove to be the final determining factor in their site selection process. logistics users to their projects, as inbound cargo containers can then be better matched with export/outbound cargo, resulting in greater profitability for all concerned. Real estate opportunities What does all this mean for real estate professionals? Plenty of opportunities, as the logistics Since 2007 exports have broken records while imports have recovered then stagnated industry and exporters establish hubs with immediate proximity to empty import containers, and to distribution hubs for shipment by rail to deepwater ports, then across the ocean to Asia, Latin 130 America and elsewhere. The trend toward establishing and expanding inland ports will continue, Exports Imports Index: 12/2007 = 100 presenting opportunities for site selection, master planning and development of new logistics 120 parks and intermodal terminals. Success relies on a deep understanding of the logistics patterns of inbound container destinations, regional output, rail connectivity and public use 110 transloading infrastructure. 100 90 80 70 60 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 *Figures adjusted for inflation using GDP deflator Source: Bureau of Economic Analysis, Census Bureau 11 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Trends that shape global trade (continued) A number of other developing countries are seeking trading partners to satisfy increasing Peak season troubles? consumption influenced by migration patterns and population increase. The Word Trade Leading into the holiday season, strength of trade volumes are hinged on weak consumer Organization has granted membership to 18 developing nations since 2000, offering eased confidence. After remaining stable and lean for an extended period, the inventory-to-sales ratio has restrictions as they work to build import / export relationships abroad. Of the most recent is begun to rise once again. This could lead to discounting and reduced margins in the second half of Southeastern Asia’s Vietnam, admitted in 2007. Between 2000 and 2010 Vietnam’s population the year as well as reduced forecasts for the typical peak retail season. And with lowered forecasts increased by 10.6 percent, GDP grew by 288 percent over the same period. Russia was admitted could come yet another disappointing peak season for carriers as the expected additional volumes just this August; with some necessary reforms, the country could tap more economic potential and fail to materialize. grow its trade. Evolving business environment demands changes in maritime industry Similar trends can be seen in other countries as they integrate into the global logistics equation. As Changing dynamics of the global economic environment have helped to trigger fundamental shifts wages grow in developing nations, production shifts to meet the new consumers’ needs displacing in the maritime container industry. Operators are increasingly looking for efficiencies to increase production that once headed for export markets. So while near-shoring may bring some production their competitive advantage by reducing operating costs, minimizing redundancies in shipping back to the United States, or more likely Mexico, it will not necessarily be at the expense of routes/patterns, balancing volatility in pricing structure, and decreasing total landed shipping production overseas. Additionally, free trade agreements between the United States and other key cost to their customers. In addition, industry members are facing social and regulatory pressures trading partners will continue to spur port activity in the years to come. from stakeholders to exemplify greater corporate social sustainability and mindfulness of environmental impacts. Trends in technology and consumer behavior continue to shape the infrastructure of retail. Successful firms will marry the security of a robust supply chain capable of withstanding Rising cost of energy disruptions with flexible logistics architecture agile enough to respond to evolving consumption The rising cost of energy, which can account for as much as 60 percent of total operating expenses, patterns. Following the earthquake and tsunami that devastated Japan in March 2011, the list of has pushed some members of the container shipping industry to rethink how they manage their manufacturing companies who closed their doors was long. Toyota production plants halted supply chains in order to keep transportation costs low. The volatility in energy prices can have a delivery of vehicle component parts for several days while communities rebuilt, revealing the dramatic impact on the overall cost of shipping; a 10 percent shift in oil prices can raise the cost fragility of a just-in-time inventory strategy. This disruption underscored how important supply of shipping a container by as much as 3.6 percent. The price of oil, down from its peak in April of redundancy is to a company. Natural disasters are only one of the many threats multinational 2011, has started to creep back up in recent months raising fears of international supply constraints corporations must negotiate. and other geopolitical tensions. Uncertainty hinders business investment both at home and abroad Slow steaming The mounting European debt crisis has drawn caution from investors and business leaders alike. To help mitigate volatility in energy prices and soak up excess capacity, container shipping lines Government bond yields have been pushed up, particularly in Greece, Portugal and Spain, adding have implemented “slow steaming” practices to help decrease operating costs. Decreasing cruising to the already insurmountable debt on the respective governments’ balance sheets, furthering speeds to 20 knots, a 20 percent reduction in speed, can decrease fuel consumption by as much the levels of concern for Europe to pull itself out of the current crisis. The labor force has been as 40 percent (in wake of rising operating costs and decreased demand, many lines have adopted burdened with the brunt of the larger fiscal issues, pushing unemployment rates to all-time highs “super-slow steaming,” reducing cruising speed to 12 knots). Industry experts suggest carriers have and consumer confidence increasingly lower. already gotten all they can out of this tactic. 12 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Global value chains example, faces a number of structural challenges including port and road congestion, shortages The increasing importance of global production chains, driven by the rising trade of intermediate in electricity, and a slow and cumbersome bureaucracy. Capital investment is necessary in these inputs, has highlighted the necessity of maximizing efficiencies in manufacturing and shipping value emerging markets so they may fully integrate into the global market. chains. Global corporations are increasingly reliant on emerging countries able to supply low-cost raw materials and production inputs and other services. China’s climb up the global value chain has Larger ships, more efficiency been dramatic but rising wages and an aging population are presenting challenges for its export-led The expansion of the Panama Canal is creating new opportunities. For shipping lines, the growth model and leading to a push for more domestic consumption. expansion will result in operational efficiencies, improved vessel utilization and fuel efficiency. The emergence of larger capacity vessels places the burden of competitiveness on ports to be able China’s gradual transition has created opportunities for other emerging economies in Asia, Africa to handle increased shipping volumes now expected. While western coastal ports are currently and Latin America to participate in the global manufacturing supply chain. Mexico especially will handling post-Panamax ships, ports on the East and Gulf coasts are still preparing. continue to produce more of the manufactured goods consumed in America. Several ports have projects underway to deepen shipping channels, expand intermodal/rail Attempting to drive down costs by relocating presents challenges beyond sourcing cheap connectivity and retrofit existing infrastructure to accommodate the larger vessels expected over labor. Infrastructure, logistics, custom administration and the countries’ regulatory and security the coming years. This investment and expansion will bring growth opportunities to those ports environments are equally important factors for companies can all affect total landed cost. India, for equipped to handle larger ships, where there are rail and road connections to ship cargo inland as well as modern, functional distribution product. Sector Spotlight: Shipping capacity versus rates Charting the course forward will require flexibility to achieve success Success of port-centric industrial real estate is closely correlated to port activity and broadly Steamship lines have been caught in a vortex of capacity, rates and influenced by the maritime logistics industry’s macro trends. Broad shifts in consumption patterns, demand growth over the last several years. In 2009, when global shipping an increasingly complex business environment and constant infrastructure developments are demand collapsed, carriers were forced to slash rates. Still, many new redefining what demand for such space will look like. In order to accommodate uncertainty, users of ships were delivered and lines were forced to cut capacity using lay-ups space are requiring shorter length commitments. and tactics like slow-steaming. The industry could not maintain balance and billions of dollars of losses ensued. In 2010, as trade continued to Activity in the United States’ East and Gulf ports may increase as more become post-Panamax rebound and shipping lines managed to raise rates, the industry had its ready and per-container costs justify the shift away from western ports. Finally, technology will most profitable year ever. But by the time 2011 rolled in, once again too continue to be the catalyst for evolution from manufacturer to consumer, further increasing the many ships had been delivered, demand growth faltered in Europe and expectations of all parties. Stakeholders will benefit from a proactive approach to the challenging America and supply and demand fell out of balance. Rates fell and losses economic recovery near-term with calmer waters expected on the horizon. reemerged. Early in 2012, shipping lines managed to push through rate increases and recoup some of their 2011 losses, but a slowing global economy and some new capacity coming online may undermine their pricing power. The same dynamics that have whipsawed the shipping industry remain in play, leading the multi-year outlook for shipping rates to be summed up in one word: volatility. Meanwhile the industry will try to manage capacity and look for innovations in pricing and contracts, but the challenge is high with so many ships on order. 13 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 What’s happening in Panama? Time for an upgrade The canal has lost considerable market share to alternate trade routes in years past, stemming is the Panama Colon Container Port, which will have a 2.25 million TEU capacity upon build-out. from its outdated infrastructure incapable of accommodating modern shipping vessels. Namely, With a slated completion date of the first quarter of 2015, Colon will become one of the top 12 post-Panamax and super-post-Panamax ships that each have a carrying capacity of about transshipment terminals in the world and the second largest on the Atlantic side of the 4,848 and 8,600 TEUs, respectively. This reality is in addition to a global logistics environment Panama Canal. characterized by rising fuel costs, expedited time-to-market deliveries and the one goal shared by all shipping lines: maximizing service levels, while mitigating costs. As a result, trade routes A temporary reprieve are integral. Plans to revitalize the Panama Canal were first announced in 2006, with a scheduled completion date of 2014; this has since been revised to 2015. The expansion project aims to create a The canal’s existing configuration has caused heightened wait times that have forced carriers to new third lane of traffic, which will allow the transit of longer and wider ships, and consists bid for transit slots at auction. Upon completion, the third lane/locks will be able to accommodate of deepening and widening canal entrances while constructing new lock sets on the Pacific post- and new-Panamax ships—far more fuel efficient than smaller, older vessels—to pass and Atlantic sides. An additional undertaking involves the widening and deepening of existing through and minimize old wait times. Larger economies of scale and speed equate to reduced navigational channels in Gatun Lake and the deepening of Culebra Cut. Most dredging has been shipping costs. Shipping lines that call on the passage will enjoy a cost savings of 7 to 17 percent completed, while significant work remains on building the locks themselves. Upon completion, if they switch to post-Panamax vessels, as estimated by the Panama Canal the canal will be able to accommodate new-Panamax container vessels whose load capacity Authority (ACP). totals 12,600 TEUs. Transshipment hub for the western hemisphere Revitalization of the canal and its subsequent delay offers a temporary reprieve for several U.S. Moreover, due to its ideal location, Panama acts as a transshipment hub for smaller ports that East Coast Seaports, many of which are racing to complete modernization projects of their own lack the capacity and infrastructure required to handle larger vessels. Existing terminals would to become post-Panamax supply chain contenders as ships from, say, China, transit Panama. face serious capacity constraints if cargo throughput were to exponentially grow tomorrow. This Many of these modernization projects are, in turn, running behind schedule as U.S. seaport is especially true on the Atlantic side. To cater to anticipated TEU volumes, the Panamanian competition only intensifies to vie for Panama-based traffic to come. government has encouraged new infrastructure projects at the terminals. One such development Panama assumes full Panama Canal Port of - Port Miami's deep dredge Port of Charleston - responsibility for the Expansion Baltimore's 50 expected to be complete First phase of administration, operation project broke foot dredge - Dredging of Kill Van Kull new marine Panama Vessel Ports ready and maintenance of the ground completed and Newark Bay terminal ready Canal related to receive Panama Canal Channels to be complete updates updates post-Panamax vessels 1999 2006 2007 2009 2012 2013 2014 2015 2018 2020 Maersk's Emma Canal's contract Maersk's Panama Colon - Panama Canal Expansion project to - Port of Virginia - First phase of Class vessels for the design Triple-E vessels Container Port be completed Craney Island expansion set to with a capacity and construction with 18,000 to open - Redevelopment of Panama Canal Colon be completed of 15,500 TEUs of new locks TEUs capacity Port terminal to be completed - Port of Charleston - Dredging of harbor launched awarded expected to - Port of NY/NJ - Raising of the Bayonne to be completed between 2020 and 2024 be built Bridge expected to be completed 14 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Seaport and airport connectivity Prince Rupert Seattle / Tacoma Vancouver Chicago [ORD] Newark-Liberty [EWR] New York / New Jersey Kansas City New York [JFK] Columbus Indianapolis Baltimore Oakland [OAK] St. Louis [IND] Norfolk Oakland Louisville [SDF] Virginia Inland port connections legend Los Angeles / Tier I container ports Long Beach Dallas / Fort Worth [DFW] Memphis [MEM] Charleston Emerging container ports Los Angeles [LAX] Atlanta [ATL] Hardeeville Established inland ports Savannah San Antonio Mobile Future inland ports New Orleans Jacksonville Houston St. Lucie Port Everglades Miami Seaport and airport legend Miami [MIA] Major U.S. container seaport Anchorage [ANC] Major U.S. cargo airport Manzanillo Lazero Cardenas Emerging U.S. seaport Global Economy BRIC exports have grown by $316.1 145.0% Billion the total monthly volume since 2005, reaching 248.4 billion in 2011 of U.S. international goods trade (imports plus exports) recorded in May 2011, the highest level recorded since the summer of 2008 U.S. exports of goods and services increased by 14.2% in 2011 to Global real GDP growth is forecasted to $2,103.4 average Billion 3.4% annually through 2015 16 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 China dominates container growth Top 10 ports Worldwide cargo volume 0 5 10 15 20 25 30 35 Shanghai 4.0 Worldwide TEU Volume (B) 3.5 Singapore 3.0 Hong Kong 2.5 2.0 Shenzhen 1.5 1.0 Busan 0.5 Ningbo-Zhoushan 2012 YTD Estimate 2001 2002 2003 2004 2005 2006 2009 2011 2007 2008 2010 Guangzhou Habor 2011 TEU Volume (million) Qingdao 2010 TEU Volume (million) Jebel Ali, Dubai Rotterdam World’s top five fastest growing and slowing ports 17 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Emerging North American ports In 2011 cargo volumes for emerging ports collectively increased by over 635,000 TEUS from 4 million TEUs during 2010. This is a 15.8 percent year-over-year (YoY) increase in TEU cargo Mexico volume, and represents a significant increase across the board when compared to established ports. Manzanillo The Panama Canal expansion is set to be completed in 2015 and ports along the East and Gulf 2011 TEU volumes: 1,762,508 Coasts of the U.S. are positioning themselves to take advantage of the increased container (16.6% YoY growth) traffic that will occur once the expansion is finished. Ports are deepening channels and improving 2010 TEU volumes: 1,511,378 infrastructure as they vie for future market share. As companies seek to diversify their port strategies to mitigate the risk of supply chain disruptions caused by natural disasters, terrorism and labor disruptions, they are expanding their options to alternative ports, which has helped to further Growth Drivers: Busiest cargo port in Mexico’ availability of entitled land; development of a fuel growth at emerging ports. new terminal that, alone, will be able to handle 2 million TEU and accommodate super post- Panamax ships For this section, seaports whose annual cargo volumes exceed 150,000 TEUs and enjoyed YoY • Only port in Mexico capable of double-stacking containers onto railcars, providing growth of 10 percent or higher are considered. Additionally, substantial infrastructure projects efficient movement of cargo throughout the country and as far as the Texas border, which underway at a respective port and its interconnectivity to/with the U.S. influenced the selection is 1,000 miles away. criteria as well. Canada Lazaro Cardenas Prince Rupert 2011 TEU volumes: 953,497 (19.8% YoY growth) 2011 TEU volumes: 410,476 2010 TEU volumes: 796,023 (19.5% YoY growth) 2010 TEU volumes: 343,366 Growth Drivers: Alternative to busy U.S. West Coast ports; railway and highway infrastructure upgraded in recent years; availability of entitled land; developing a new terminal whose first Growth Drivers: Deepest natural harbor in North American; shortest trade route with Asia; phase includes seven super post-Panamax STS gantry cranes 988 acres of available, entitled land; state-of-the-art facilities; all terminals have the capacity to • Located on the Pacific Coast of Mexico, Lazaro Cardenas is the deepest port in Latin increase volumes or expand their operations America and has navigation channels of 55 and 60 feet that can handle ships with • An alternative to congested U.S. west coast ports, supported by Canadian National capacities of up to 12,500 TEUs. Railroad connections across the top of North America (100 hours to Chicago). • On-dock intermodal rail links directly into the southern U.S. • The closest North American port to Shanghai. It is 36 hours closer to Shanghai than • Expected to handle over one million TEUs in 2012. Vancouver and is 68 hours closer than Los Angeles. 18 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 U.S. Gulf Coast • Largest break-bulk forest products port in the U.S. The Alabama State Port Authority’s McDuffie Terminal is the second largest coal terminal in the U.S. and the largest import New Orleans, LA coal terminal. • Container, general cargo and bulk facilities have immediate access to two interstate 2011 TEU volumes: 477,363 systems and five Class I railroads. The port authority and partners recently invested over (11.7% YoY growth) $340 million for its container terminal and turning basin which is capable of handling post-Panamax vessels in its 45 foot draft channel. In June, the U.S. department of 2010 TEU volumes: 427,518 transportation approved a $12 million TIGER grant to develop phase 1 of Garrows Bend Intermodal Container Transfer Facility. Growth Drivers: Connects international markets to America’s Midwest; port’s location provides faster transit time to the industrial Midwest markets of Memphis, Kansas City and Chicago; steel imports are the port’s primary break-bulk commodity • The Port of New Orleans is ideally located on a 14,500 mile inland water system. It is U.S. East Coast the nation’s number one port for importing natural rubber from Indonesia, Malaysia and Thailand. In addition, it is also ranked among the top ports in the nation for imported Port Everglades, FL steel, coffee, forest products, London Metal Exchange cargo and frozen poultry. • Three capital improvement projects totaling nearly $100 million were completed earlier 2011 TEU volumes: 880,999 this year. These improvements will help the port to capture new cargo anticipated (11.1% YoY growth) with the Panama Canal expansion in 2015. In addition to the above, construction of 2010 TEU volumes: 793,227 the Mississippi River Intermodal Terminal is expected to begin in fall 2012. This 12 acre freight rail yard is planned to be built adjacent to the Napoleon Avenue Container Terminal and will provide rail access to the six Class I railroads serving the port. Growth Drivers: Proximity to the Panama Canal, ICTF under construction, availability of entitled land, proposed inland projects located within 50 miles from the port • Port Everglades is strategically located to serve the Atlantic trade routes connecting Latin, Caribbean and South American countries to the U.S. In addition to being the second Port of Mobile, AL busiest cruise port in the world, it is South Florida’s main seaport for receiving petroleum products. 2011 TEU volumes: 169,282 • The port in collaboration with Florida East Coast Railways plans to develop an (15.3% YoY growth) approximately $72 million Intermodal Container Transfer Facility at Port Everglades. 2010 TEU volumes: 146,761 This facility which will reduce the need for trucks to transfer containers to and from port terminals is scheduled to be completed by 2014 and will be used to directly transfer cargo Growth Drivers: One of the largest metropolitan areas along Gulf of Mexico; growth sectors from ships via rail. include the offshore natural gas, shipbuilding and ship repair industry; as growth in offshore drilling increases, shipbuilders are increasingly building offshore supply and rig-tending vessels and repairing rigs at their facilities on Mobile river; Airbus selected Mobile to assemble, aircraft 19 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Seaport property clock Port of Miami Port of Seattle, Port of Tacoma Peaking Falling market market Rising Port of Baltimore Bottoming market market Port of Oakland Port of Virginia Port of Long Beach, Port of Houston, Port of Jacksonville Port of Los Angeles, Port of New York / Port of Charleston New Jersey Port of Savannah Reading the clock that favor tenants. Pricing upswings can slow or reverse, as is indicated by what could be a Our seaport property clock shows an interesting shake-up since this time last year. Overall, the temporary stall in a few markets, while others have surged in the past year as leasing velocity seaport markets continue to lead the broader industrial real estate market, but some individual picked up. ports have now slipped. Notably, momentum has slowed near the Los Angeles and Long Beach ports while Jacksonville, Miami, Seattle and Tacoma have swung significantly into landlord- Historically tight, land-constrained markets like the Southern California ports did not see run-up favorable territory. in leasing activity in their immediate seaport vicinity, which kept rent appreciation relatively flat, although the Inland Empire benefited immensely throughout the course of the year. Other The Jones Lang LaSalle seaport property clock shows the relative positions in their rental growth markets with extremely low vacancy and blocks of space available, like Seattle and Tacoma, saw cycle of industrial warehouse and distribution markets that are adjacent to major U.S. seaports. that excess space get taken down and rents more rapidly rise. Outside of the west coast, some Markets generally move clockwise around the clock, with markets on the left side of the clock of the markets that were overbuilt heading into the recession have had the greatest opportunity typically indicate landlord leverage while those on the right are more suggestive of conditions for recovery, while others like Oakland are now entering a new development cycle. 20 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Select top U.S. seaports and property market indicators 2011 Immediate YTD Average Volumes 2011 2012 YTD TEU market 2011 net 2012 net asking (TEUs) Annual (TEUs) change size Current absorption absorption rents ▼ change 2012 (m.s.f.) vacancy (m.s.f.) (m.s.f) (NNN) Terminal operators and comments APM Terminals; California United Terminals; Eagle Marine Services; Port of Los Angeles; Seaside Port of Los Angeles* 7,940,511 1.4% 4,010,204 6.4% 100.1 7.1% -0.1 -0.7 $6.60 Transportation Services LLC; TraPac, Inc.; West Basin Container Terminal LLC (2); Yusen Terminals Inc. International Transportation Service, Inc.; Long Beach Container Terminal Inc.; Pacific Maritime Services; Port of Long Beach* 6,061,091 -3.2% 2,889,600 -2.6% 152.4 6.7% 0 -0.5 $6.12 SSA Terminals; SSAT Long Beach, LLC; Total Terminals International Port of New York / American Stevedoring Inc.; Maher Terminals LLC; New York Container Terminal; Global Terminal & 5,503,485 4.0% 2,720,790 1.5% 211 7.6% 0.6 1 $5.58 New Jersey** Container Services LLC; Port of NewYork/New Jersey Port of Savannah 2,944,678 4.2% 1,508,367 2.4% 39.2 17.9% 4 0.1 $3.70 Georgia Ports Authority APM Terminals; TransBay Container Terminal Co.; TransPacific Container Service Corp; Seaside Port of Oakland 2,342,504 0.5% 1,148,853 0.6% 104.1 6.2% -0.6 0.9 $6.96 Transportation Services; Total Terminals, Inc. LLC; SSA Terminals, Inc.; Eagle Marine Services Port of Houston 1,866,450 9.3% 1,087,315* 0.3% 52.5 7.7% 0.2 1.3 $4.20 Port of Houston Authority Port of Virginia 1,918,029 1.2% 994,727 5.4% 50.8 7.3% -0.1 -0.1 $4.56 Virginia International Terminals; APM Terminals Port of Seattle* 2,033,535 4.9% 1,006,390 -0.1% 35.7 3.0% 0.8 0 $7.05 Eagle Marine Services; SSA Terminals; Total Terminals International; Port of Seattle; Northland Services APM Terminals; Husky Terminal & Stevedoring; Olympic Container Terminal; Pierce County Port of Tacoma* 1,488,790 3.9% 729,767 1.3% 23.6 6.6% 0.3 0.1 $5.10 Terminal; Totem Ocean Trailer Express; Washington United Terminals Port of Charleston** 1,381,349 1.3% 743,384 7.4% 26.9 12.9% 1.6 -0.2 $3.80 South Carolina State Ports Authority Seaboard Marine; South Florida Container Terminal; Port of Miami Terminal Port of Miami 906,607 6.8% 455,001 -0.5% 97.6 8.2% 0.9 0.6 $4.60 Operating Company Jaxport; Ceres Terminals Inc.; Costal Maritime; Marine Terminal Corp; SSA Marine (SSA Cooper Port of Jacksonville 899,258 8.9% 437,660 2.4% 68.1 12.6% 1 0.1 $3.49 LLC); APM; Global Stevedoring / ICS Logistics; TraPac Marine Terminal Port of Baltimore 631,802 16.0% 325,852 5.0% 97.7 10.8% -0.4 -0.1 $4.48 Balterm; Mid-Atlantic Terminal; Ports America; Maryland International Terminals, Inc. * *Jan-July **Estimated Source: American Association of Port Authorities, individual ports and Jones Lang LaSalle Research Seaports $1257.0 53 of the 281 containerships, set to be delivered in the current cost to ship a 2013 will be post-Panamax, ships with container according to the China capacity between 10-18,000 TEUs Containerized Freight Index Demand for cargo throughput is projected to double at all major U.S. international ports between 2010 & 2020. Between 2002 & 2010 vessel capacity calling on U.S. ports is up by 38.6% $13.0 billion in public infrastructure investment has been planned and/or completed this decade. 32 Seaport Outlook ● Fall 2012 22 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of New York / New Jersey Port of New York / New Jersey Property clock Port Area Terminal 114.2 Market Score Operating Score Port of Miami 88.0 106.5 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • The Bayonne Bridge is being raised from a clearance height of 151 feet to 215 feet to Port of Charleston Port of Savannah facilitate access by post-Panamax cargo vessels. The $1 billion project is projected to be completed in the Fall of 2015. TEUs versus port-market occupancy • The Kill Van Kull and Newark Bay channels are being dredged to 50 feet by 2014. • The ExpressRail project, which will allow for double-stacked rail service between the port TEUs TEUs Port-market occupancy and the Midwest, will also increase rail shipping capacity through the addition of new tracks. 6,000,000 100% The project includes raising overpasses and increasing tunnel clearances to support 5,000,000 98% double-stacked trains. The project is also expected to be completed in 2014. 4,000,000 • Global Terminal & Container Services will expand Global Terminal Port Jersey in Bayonne 96% by developing 70 acres to accommodate a new container terminal. This new terminal will be 3,000,000 able to handle 1.7 million TEUs per annum, and will be delivered in 2014. 94% 2,000,000 1,000,000 92% Market conditions • The tight port submarket has exhibited low vacancy rates – its current vacancy of 7.6 0 90% percent is now slightly lower than the rate of 7.7 percent it has averaged since the first 2007 2008 2009 2010 2011 YTD 2012 quarter of 2010. • Leasing volumes have fallen off compared to last year; transactions by square footage have Port vital facts decreased 77.2 percent. However, total net absorption has rebounded from a flat 2010- 2012 YTD volume: 2,720,790 (June) 2011 to 1.0 million square feet. 2011 volume: 5,503,485 • The current rate of $5.58 per square foot is 4.1 percent higher than the asking rental rate as Main routes: Kill Van Kull, Newark Bay, Upper New York Bay of the third quarter of 2011. Trading partners: China, India, Italy, Germany, Brazil Development Cranes/post-Panamax Cranes: 59 | 45 • Development in the immediate area, spurred by demand for Class A space and Urban Current channel depth: 40 – 50 feet at mean low water Transit Hub as well as Grow New Jersey state incentives, has increased in the past year. • Three projects totaling 934,000 square feet were under construction as of the second Container terminals: 6 | APM Terminal, Maher Terminal, Port Newark Container Terminal, Global Marine Terminal, New York Container quarter (80 percent preleased), and two additional spec facilities totaling 614,000 square Terminal, Red Hook Container Terminal feet were recently announced. • The development pipeline remains significant, as about 14 facilities amounting to about 7.1 Post-Panamax ready: No million square feet are proposed in the port submarket. Class I Rail Operators: Canadian-Pacific Railway, CSX Intermodal, Norfolk Southern 32 Seaport Outlook ● Fall 2012 23 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port New York New Jersey Port ofof New York/ /New Jersey Newark Liberty International Airport Port Newark Container Terminal Red Hook Container Terminal Maher Terminal APM Terminal Global Marine Terminal Bayonne Bridge Kill Van Kull New York Container Terminal N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2012 market size vacancy absorption absorption of stock rents (NNN) rank 5.5 m 4.0% 2.7 m 211.0 m.s.f. 7.6% 25.5% 0.6 m.s.f. 1.0 m.s.f. 0.5% $5.58 1st 32 Seaport Outlook ● Fall 2012 24 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Los Angeles Port of Los Angeles Property clock Port Area Terminal 112.1 Market Score Operating Score Port of Miami 89.8 98.0 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • The port will invest $1 billion over the next five years to expand and modernize facilities. Port of Charleston Port of Savannah Projects include: a new terminal for TraPac, doubling the size of China Shipping’s terminal, and infrastructure improvements to the Pier A Replacement Yard (rail switching and TEUs versus port-market occupancy storage). Additionally, other general rail improvements will be implemented. TEUs TEUs Port-market occupancy • BNSF will create a near-dock facility adjacent to the port with direct access to the Alameda 10,000,000 100% Corridor. Containers will be loaded on trains just four miles from the docks. • Union Pacific is modernizing its near-dock Intermodal Container Transfer Facility, which will 98% allow the operator to double its cargo throughput. 7,500,000 • Potential labor disputes and future regulations/fees are potential challenges for the port. 96% Market conditions 5,000,000 94% • Total TEU counts at the Ports of Los Angeles & Long Beach remain flat, which impact the demand for additional industrial space. 2,500,000 92% • Los Angeles industrial leasing momentum has slowed over the past five quarters, and rents 2008 2009 2010 2011 2012 YTD are generally stagnate. Though, the market-wide vacancy rate is a healthy 5.1 percent. “Maintaining” as opposed to “growing” sums up current conditions. • The vacancy rate in the immediate area is 200 basis points higher than the county’s. This Port Vital Facts can be attributed to the nature of currently available product, which averages 100,000 2012 YTD volume: 4,010,204 (June) square feet with a 1976 construction date; smaller, older buildings are not as desirable as 2011 volume: 7,940,511 newer, big-box inventory in today’s economy. Main routes: San Pedro Bay • Functionally superior product is enjoying strong absorption momentum. This, when considering the market vacancy rate, makes a case for new development. Trading partners: China/Hong Kong, Japan, South Korea • Velocity is expected to improve when the economy does; most believe by 2014. Cranes/post-Panamax Cranes: 77 (32 Super Post Panamax Plus) Current channel depth: 53 feet Development • Prologis and Watson Land Company are among those developers who have buildings Container terminals: 9 under construction within a 15-mile radius of the port. Post-Panamax ready: Yes Class I Rail Operators: UP, BNSF 32 Seaport Outlook ● Fall 2012 25 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Los Angeles Port ofof LosAngeles Pier A Replacement Yard Main Line Rail Improvements TraPac Terminal Expansion Container Terminal Redevelopment China Shipping Terminal Exp. TICTF Expansion (Rail Upgrades) Pier 400 ICTF Expansion (Rail Upgrades) N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2012 market size vacancy absorption absorption of stock rents (NNN) rank 7.9 m 1.4% 4.0 m 100.1 m.s.f. 7.1% 11% -0.1 m.s.f. -0.7 m.s.f. 0% $6.60 2nd 32 Seaport Outlook ● Fall 2012 26 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Long Beach Port of Long Beach Property clock Port Area Terminal 109.1 Market Score Operating Score Port of Miami 93.0 85.0 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • The port will invest $4.5 billion over the next decade to modernize its facilities. Projects Port of Charleston Port of Savannah include: replacement of the aging Gerald Desmond Bridge (a critical component of the port’s transportation network); consolidating and updating two aging container terminals in TEUs versus port-market occupancy Middle Harbor (which will double TEU-handling capacity there); improving Pier G’s TEUs TEUs Port-market occupancy capabilities; potentially building a new terminal, Pier S; the Green Port Gateway, which will 8,000,000 100% increase the port’s on-dock rail capacity; and local, surrounding roadwork. • BNSF will create a near-dock facility adjacent to the port with direct access to the Alameda 98% Corridor. Containers will be loaded onto trains just four miles from the docks. 6,000,000 • Union Pacific is modernizing its Intermodal Container Transfer Facility, which will allow the 96% operator to double its cargo throughput. • Challenges: The Port of Los Angeles, potential labor disputes and future regulations/fees. 4,000,000 94% Market conditions 2,000,000 92% • Although inventory is attracting tenants, Los Angeles continues to face competition from the 2008 2009 2010 2011 2012 YTD Inland Empire to the east, particularly when it comes to big-box, warehouse product. • Tenants most active in the basin’s market include 3PLs, cold storage operators, e- commerce and automobile-related companies. Port Vital Facts • Institutional buyers continue to purchase, including Prologis, KTR Capital Partners and 2012 YTD volume: 2,889,660 (June) TIAA-CREF. Similar to last year, portfolio sales remain common. 2011 volume: 6,061,085 Main routes: San Pedro Bay Development • The average building size of construction in the immediate vicinity is 158,000 square feet. Trading partners: China, South Korea, Japan • The time-to-lease-average for buildings within a 15-mile radius of the port is 14 months. Cranes/post-Panamax Cranes: 66 Post Panamax Cranes Given tenant appetites for first-generation space, new construction is expected to be Current channel depth: 76 feet (main channel) absorbed at an expedited pace. Cargo terminals: 6 Post-Panamax ready: Yes Class I Rail Operators: UP, BNSF 32 Seaport Outlook ● Fall 2012 27 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Long Beach Port ofof Long Beach Anaheim / Santa Fe Intersection Improvement Pier S Development Gerald Desmond Bridge Middle Harbor Terminal Consolidation Project Pier G Improvements N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2012 market size vacancy absorption absorption of stock rents (NNN) rank 6.0 m -3.2% 2.9 m 152.4 m.s.f. 6.7% 16.3% 0 m.s.f. -0.5 m.s.f. 0% $6.12 3rd 32 Seaport Outlook ● Fall 2012 28 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Savannah Port of Savannah Property clock Port Area Terminal 85.8 Market Score Operating Score Port of Miami 60.0 84.5 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • The Georgia Ports Authority has focused its efforts on improving the efficiency and flexibility Port of Charleston Port of Savannah of its Garden City Terminal. Investments in manpower, technology and specialized crane equipment have been made to reduce load / unload times and expand the port’s ability to TEUs versus port-market occupancy accommodate a variety of cargo. TEUs TEUs Port-market occupancy • The process for approval to begin dredging a 32.7-mile length of the Savannah River from 42 3,500,000 100% to 47 feet at mean low water is well underway. A U.S. Army Corps of Engineers’ record of 3,000,000 decision is expected late 2012, with construction to take five years to complete. 90% • The four-lane, 3.1-mile continuation of Jimmy DeLoach Parkway will tie I-95 to Bourne 2,500,000 Avenue, Garden City Terminal’s primary artery. The $140.0 million project is expected to 2,000,000 80% relieve traffic on the heavily travelled local state roads. Additionally, a 6,000-foot extension of 1,500,000 the Mason Intermodal Container Transfer Facility is planned, allowing trains to enter the rail 1,000,000 70% yard from the Northwest, improving efficiency. 500,000 0 60% Market conditions 2007 2008 2009 2010 2011 2012 YTD • Despite significant vacancy rates, Savannah’s fundamentals reflect a balanced market. Asking rents are increasing while concessions dissipate. • Currently, warehouse buildings within a close proximity to the port are similarly occupied Port vital facts when compared to those beyond a five-mile radius. Long term, however, port-centric 2012 YTD volume: 1,508,363 (June) properties will likely average greater occupancy rates due to access the dense transportation 2011 volume: 2,944,684 infrastructure and relatively limited development sites. Main routes: Savannah River • A two-year average $0.60 cent per square foot premium has been asked for space near the port, supporting its desirability. Trading partners: Northeast Asia, Mediterranean, Southeast Asia, North Europe Development Cranes/post-Panamax Cranes: 33 | 23 • Savannah is working off an oversupply of industrial space. Although absorption has been Current channel depth: 42 feet at mean low water positive for several of the previous quarters, availabilities are plentiful, minimizing the Container terminals: 2 | Garden City & Ocean likelihood of new speculative construction. • Build-to-suits for manufacturing and cold storage space, however, are currently underway. Post-Panamax ready: No, Estimated delivery 2017 Mitsubishi and Nordic are two such examples. Class I Rail Operators: CSX & Norfolk Southern 32 Seaport Outlook ● Fall 2012 29 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Savannah Port ofof Savannah N Argyle Island Turning Basin Garden City Terminal Savannah / Hilton Head International Airport Mason Intermodal Container Transfer Facility International Paper company Savannah River Ocean Terminal Talmadge Memorial Bridge - 185’ MHW air draft 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2011 market size vacancy absorption absorption of stock rents (NNN) rank 2.9 m 4.2% 1.5 m 39.2 m.s.f. 17.9% 19.1% 4.0 m.s.f. 0.1 m.s.f. 0.0% $3.70 4th 32 Seaport Outlook ● Fall 2012 30 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Jacksonville Port of Jacksonville Property clock Port Area Terminal 81.3 Market Score Operating Score Port of Miami 60.8 72.0 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • In the past 10 years, JAXPORT has invested more than $400 million to improve the port’s Port of Charleston Port of Savannah infrastructure, and over the next five years, it plans to invest further $1.25 billion in infrastructure improvement projects. TEUs versus port-market occupancy • Of the total $1.25 billion, they plan to invest $600 million in harbor improvement projects, TEUs TEUs Port-market occupancy which will resolve the crosscurrent concerns and deepen the harbor to a controlled depth of 1,000,000 100% 50 feet. Analyzing the costs and benefits of deepening the St. Johns River is expected to be completed by 2013 and we expect the port to be post-Panamax ready by 2016 – 2018. 800,000 • Last December, the U.S. Department of Transportation granted $10 million for the 94% 600,000 development of an intermodal container transfer facility at Dames Point Marine Terminal. The project is expected to be completed by 2014 and will complement the existing on-dock 400,000 rail facilities at Talleyrand Marine Terminal and Blount Island Marine Terminal. 88% 200,000 Market conditions 0 82% • In 2008, over 4.8 million square feet of new industrial buildings were delivered in the 2007 2008 2009 2010 2011 2012 YTD market. Lack of substantial demand from tenants had pushed the vacancy rates to as high as 14.0 percent. • Although market conditions have improved in the past few quarters, vacancy rates are still Port vital facts the highest in the state of Florida at 12.6 percent. For the next few quarters, we expect 2012 YTD volume: 437,660 (June) vacancy rates to continue to remain flat. 2011 volume: 900,433 • Recently an increased number of Third Party Logistics firms and shippers of specific goods Main routes: 21-mile stretch of the St. Johns River connects to all have selected Jacksonville for their operations. terminals • Rental rates are likely to remain flat through the year while landlords are expected to increase concessions to retain and sign new tenants for long term. Trading partners: Brazil, Argentina, Russia, Columbia, Canada and Bahamas Cranes/post-Panamax Cranes: 18 | 2 Development Current channel depth: 36 - 40 feet at mean low water • Pattillo Industrial Real Estate, Ash Properties, EastGroup Properties and GEM Realty Cargo terminals: 3 | Tallyrand, Blount Island, Dames Point Capital are some of the biggest land owners in the area. • As considerable large blocks of spaces are available for lease and sale, it is unlikely that Post-Panamax ready: No any new speculative buildings will break ground anytime soon. Class I Rail Operators: CSX, Norfolk Southern, Florida East Coast Railway 32 Seaport Outlook ● Fall 2012 31 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Jacksonville Port of Jacksonville Cruise Terminal Blount Island Marine Terminal TracPac Container Terminal at Dames Point JAXPORT Blount Island and Dames Point Operation Jacksonville Downtown Talleyrand Marine Terminal N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2012 market size vacancy absorption absorption of stock rents (NNN) rank 0.9 m 8.9% 0.4 m 68.1 m.s.f. 12.6% 12.8% 1.0 m.s.f. 0.1 m.s.f. 0.2% $3.49 5th 32 Seaport Outlook ● Fall 2012 32 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Baltimore Port of Baltimore Property clock Port Area Terminal 78.1 Market Score Operating Score Port of Miami 57.0 70.5 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • Ports America Chesapeake is upgrading the Seagirt Marine Terminal in preparation for Port of Charleston Port of Savannah post-Panamax vessels. Berth 4 was dredged to a depth of 50 feet and four 14-story cranes designed to reach across the width of large container ships recently arrived from China. TEUs versus port-market occupancy • CSX is working with the state of Maryland to build a new state-of-the-art intermodal facility TEUs TEUs Port-market occupancy that will be incorporated into CSX’s National Gateway network. The facility will integrate the 700,000 100% Seagirt Marine Terminal and the Port of Baltimore to CSX’s double-stack system. 600,000 Market conditions 500,000 95% • Leasing and investment activity has focused in the Baltimore / Washington corridor to the 400,000 southwest of the port itself. 300,000 • Positive net absorption on the year has come from submarkets outside the immediate port 200,000 90% area with several major move-in’s in Howard and Anne Arundel counties. 100,000 • Rental rates have not shown a great deal of growth in the overall Baltimore market. One 0 85% contributing factor is a large glut of outdated space that remains chronically vacant. 2007 2008 2009 2010 2011 YTD 2012 • Investors continue to show interest along the I-95 corridor as investment activity continued through the summer. Institutional REITs, such as First Industrial Income Trust, have been actively purchasing. Port vital facts 2012 YTD volume: 325,852 (June) Development 2011 volume: 631,806 • Duke Realty holds a major parcel of developable land: Chesapeake Commerce Center. The Main routes: Chesapeake Bay site has 122 acres of remaining land available for development with the potential to accommodate up to 2.8 million square feet of warehouse space. No construction is Trading partners: China, Japan, Canada, S Korea, Brazil, Netherlands currently underway at the park. Cranes/post-Panamax Cranes: 33 | 4 • No speculative construction near the port is anticipated in the next year. Current channel depth: 50 feet at mean low water • Current speculative development in the Baltimore metro region is limited to the I-95 North market at Ryan Commercial’s Mid-Atlantic Distribution Center. Container terminals: 4 | Seagirt, Dundalk, Fairfield, Rukert Post-Panamax ready: Yes Class I Rail Operators: CSX, Norfolk Southern 32 Seaport Outlook ● Fall 2012 33 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Baltimore Port ofof Baltimore Locust Point Rukert Marine Terminal CSX Marine Terminal Seagirt Marine Terminal Dundalk Marine Terminal Fairfield Marine Terminal N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2012 market size vacancy absorption absorption of stock rents (NNN) rank 0.6 m 16.0% 0.4 m 97.7 m.s.f. 10.8% 15.4% -0.4 m.s.f. -0.1 m.s.f. -0.1% $4.48 6th 32 Seaport Outlook ● Fall 2012 34 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Houston Port of Houston Property clock Port Area Terminal 72.4 Market Score Operating Score Port of Miami 52.0 65.0 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • The Port Authority expects to commit $206 million in capital improvement projects. Port of Charleston Port of Savannah Approximately $146 million will be allocated to our container terminals for continuing development of Bayport and modernization at Barbour’s Cut. TEUs versus port-market occupancy • Additionally, $5.0 million has been reserved for maintenance dredging and other related TEUs TEUs Port-market occupancy improvements. 2,500,000 100% • Approximately $500,000 is reserved for constructing a west-bound bypass lane that will provide two dedicated, right-hand turn lanes for container trucks leaving Bayport. 2,000,000 95% • The Houston Port Authority has approved a project to deepen the shipping channel to 45 1,500,000 feet and widen it to 530 feet, while using the dredged material to create approximately 4,250 90% acres of wetlands in Galveston Bay. 1,000,000 500,000 85% Market conditions • There are currently five significant distribution centers located near the Port of Houston. 0 80% Distribution centers currently have a 60.3 percent vacancy with no plans for future 2007 2008 2009 2010 2011 2012 YTD deliveries. • Despite a high percentage of institutional ownership, investment activity has tended to be light, driven recently by corporate users and private local investors. Port vital facts • Manufacturers make up nearly a quarter of current tenant demand. Wal-Mart is by far the 2012 YTD volume: 1,084,353 (July) largest tenant and owner in the port-proximate submarket. 2011 volume: 1,866,439 • Institutional investor interest is strong in this dynamic market with nine landlords controlling Main routes: Gulf of Mexico 500,000 square feet or more. • Nearly half of the total square footage leased is by tenants who occupy more than 250,000 Trading partners: Mexico, Venezuela, Saudi Arabia, Germany, Brazil, square feet. China, Belgium, Algeria and Netherlands Cranes/post-Panamax Cranes: 41 | 13 Development Current channel depth: 40 feet at mean low water • Half of the inventory near Barbour’s Cut Terminal was built over the past decade. One-third Container terminals: 2 | Barbours Cut, Bayport of it is newer, large-scale product in the range of 100,000-500,000 square feet, with clear heights and dock configurations is suitable for modern distribution. Post-Panamax ready: Limited access, no current plans for deep dredge Class I Rail Operators: Union Pacific, BNSF Railway, Kansas City Southern 32 Seaport Outlook ● Fall 2012 35 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Houston Port ofof Houston Barbour’s Cut Container Terminal N La Porte Municipal Airport UP Rail Bayport Container Terminal Port of Houston Authority Cruise Terminal 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD net Absorption as % Average asking Port (TEU's)▲ change As of July 2011 market size vacancy absorption absorption of stock rents (NNN) rank 1.8 m 9.3% 1.1 m 52.5 m.s.f. 7.7% 8.1% 0.2 m.s.f. 1.3 m.s.f. 2.5% $4.20 7th 32 Seaport Outlook ● Fall 2012 36 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Tacoma Port of Tacoma Property clock Port Area Terminal 66.5 Market Score Operating Score Port of Miami 41.5 68.5 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Houston, Port of Virginia Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • The Port of Tacoma has been investing not only in infrastructure such as rail grade Port of Charleston Port of Savannah separation and berth extensions, but has also had a vested interest in the improvement for the port’s habitat. For the Place of Circulation Waters habitat restoration project, the port TEUs versus port-market occupancy restored 26 acres of habitat at the mouth of the Hylebos Creek, which features a valuable TEUs TEUs Port-market occupancy intertidal marsh, stream channels and forested open space. 2,500,000 100% Market conditions 2,000,000 98% • Much like the Port of Seattle, the port does have industrial distribution centers in its 1,500,000 96% immediate vicinity, but a majority of the commodities are delivered east to Sumner and north to the Kent Valley’s distribution centers. 1,000,000 94% • The warehouse vacancy in the immediate vicinity of the port is less than 7.0 percent and land constraints are halting any new industrial construction. Regionally, port-driven areas 500,000 92% such as the Sumner, Puyallup and the Kent Valley are benefiting with declining vacancy 0 90% and increasing demand. 2007 2008 2009 2010 2011 2012 YTD • Rental rates have been on a continual incline over the last six quarters across the market. • Leasing volumes have remained steady; however, as limited supply hinders the demand in the market, new developers are beginning speculative projects in the region. Port vital facts • Investment capital has been primarily coming from the port, Pierce County and the city 2012 YTD volume: 875,777 (June) of Tacoma. 2011 volume: 1,488,795 • The most active industries which have been leasing space have been distribution, logistics Main routes: Puget Sound and transit orient business lines. Trading partners: Asia, South America, North America, Europe Development Cranes/post-Panamax Cranes: 31 | 27 • Port of Tacoma is the primary land owner in the port land and waterfront areas. Current channel depth: 50 feet at mean low water • The Port of Tacoma has been scrambling to keep pace, as it has seen a substantial increase in container-shipping businesses during the summer of 2012. Cargo terminals: 6 | APM, Husky, Olympic Container, Pierce, TOTE, WA • Currently, Prologis has 240,000-square-foot distribution center under construction just a few Post-Panamax ready: Yes miles south of the port, set to deliver in 2013. Class I Rail Operators: BNSF, UPRR 32 Seaport Outlook ● Fall 2012 37 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Tacoma Port ofof Tacoma Commencement Bay TOTE Terminal Olympic Container Terminal Husky & Stevedoring Terminal APM Terminal North Intermodal Rail Yard South Intermodal Yard Huydai Intermodal Rail Yard Tacoma Rail Yard Washington United Terminal Downtown Evergreen Terminal Tacoma BNSF Tacoma Rail Yard Evergreen Intermodal Rail Yard UPRR Fife Rail Yard Interstate 5 N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2011 market size vacancy absorption absorption of stock rents (NNN) rank 1.5 m 3.9% .9 m 23.6 m.s.f. 6.6% 9.3% 0.3 m.s.f. 0.1 m.s.f. 1.0% $5.10 8th 32 Seaport Outlook ● Fall 2012 38 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Virginia Port of Virginia Property clock Port Area Terminal 66.0 Market Score Operating Score Port of Miami 34.3 80.0 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • The $1.3 billion Craney Island expansion will boost TEU capacity to 2.5 million. Port of Charleston Port of Savannah • Midtown Tunnel and MLK Freeway expansions, proposed I-460 expansion. • Both CSX’s National Gateway and Norfolk Southern's Heartland Corridor have completed over $1.0 billion in rail upgrades, which reduced bottlenecks and added double-stack capacities. TEUs versus port-market occupancy TEUs TEUs Port-market occupancy • There is a shortage of truck drivers, skilled laborers and managerial candidates. 2,500,000 100% • The in-land vehicular transit system is outdated and heavily congested at peak hours. • APM’s recent 40-year lease proposal could generate over $4 billion in state and local revenue. 2,000,000 95% Market conditions • A major distribution hub is developing in the South Suffolk submarket near the I-460 and Route 1,500,000 90% 58 interchange; both roadways offer direct access to I-95. 1,000,000 • Occupancy levels have remained relatively stable, hovering between 91 and 92 percent over 500,000 85% the past three years. • Despite a lack of large blocks, rental rates have remained relatively flat due to a market fueled by renewals rather than true growth. 0 80% • Recent capital investments have been made by the areas’ top manufacturers such as Stihl, 2008 2009 2010 2011 YTD 2012 which purchased the largest block of distribution space in the immediate market, citing the need for future expansion. • Institutional divestment has been limited; most dispositions have been owner-occupied facilities. Port vital facts However, Rubicon America Trust and W.P. Carey have liquidated assets ranging from fully 2012 YTD volume: 1,175,111 (July) leased to 100 percent vacant properties. 2011 volume: 1,918,029 • Northrup Grumman, Ace Hardware, Navy Exchange and Dana Limited have all recently signed large renewals or build-to-suits. Main routes: James River, Chesapeake Bay, Atlantic Ocean Development Trading partners: North Europe, Northeast Asia, South America, • CenterPoint, Prologis and Liberty Property Trust are the market’s major landowners. Mediterranean • CenterPoint’s Intermodal Park has generated the most interest with two, 300,000-square-foot Cranes/post-Panamax Cranes: 30| 27 build-to-suits underway and an additional 120,000-square-foot deal in progress. Current channel depth: 50 feet at mean low water, authorized to 55 • Construction has been concentrated 15 miles outside the ports in South Suffolk, due to its close proximity to I-460 and Route 58, both routes offer the quickest access to I-95 Container terminals: 4| NNMT, NIT, APMT, PMT • Due to flat rental rates and lack of new demand, developers anticipate speculative development Post-Panamax ready: Yes in the next 14-18 months, as port activity increases and subsequent distribution volumes rise. Class I Rail Operators: CSX, Norfolk Southern 32 Seaport Outlook ● Fall 2012 39 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Virginia Port ofof Virginia Newport News Marine Terminal (NNMT) James River CSX Downtown rail station APM Terminal (APMT) Craney Island Expansion Portsmouth Marine Terminal (PMT) Norfolk International Terminal (NIT) Midtown Tunnel Expansion Norfolk Southern Rail Depot N Chesapeake Bay 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of July 2012 market size vacancy absorption absorption of stock rents (NNN) rank 1.9 m 1.2% 1.2 m 50.8 m.s.f. 7.3% 5.7% -0.1 m.s.f. -0.1 m.s.f. 0.2% $4.56 9th 32 Seaport Outlook ● Fall 2012 40 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Charleston Port of Charleston Property clock Port Area Terminal 65.1 Market Score Operating Score Port of Miami 35.0 76.5 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • Designed to deliver all-tide access for post-Panamax ships, deepening of the Charleston Port of Charleston Port of Savannah Harbor from 45 to 50 feet at mean low water has the potential to significantly increase container volume to port terminals. TEUs versus port-market occupancy • President Obama called for both funding and a fast track schedule to study the project’s TEUs TEUs Port-market occupancy economic and environmental impact on the area. Although actual dredging is some time in 2,000,000 100% the future, the prospect of being called on by some of the world’s largest vessels has drawn increased attention to the area’s industrial real estate market. 1,500,000 • The former Charleston Naval Complex is being redeveloped to handle increasing 95% containerized cargo demand. The 280-acre site near Downtown Charleston is the only new 1,000,000 container terminal permitted on the East and Gulf Coasts. Demolition and preparation activities are well underway to prepare the site and critical path construction projects are 90% 500,000 advancing. A dedicated port access road connects to I-26, and is within five miles of both Norfolk Southern and CSX’s intermodal yards. First phase delivery is expected in 2018. 0 85% 2007 2008 2009 2010 2011 2012 YTD Market conditions • Warehouse occupancy in the immediate vicinity of the port is greater than the broader Charleston market. Vacancies will remain limited due to the dense network of infrastructure Port vital facts and relatively few sites for new development. 2012 YTD volume: 743,384 (June) • Corresponding to demand, two year average asking rental rates within five miles of the port 2011 volume: 1,381,352 have commanded a $0.15 per square foot premium to date. Main routes: Cooper & Wando Rivers via Charleston Harbor • Capital markets activity in the second quarter was muted. Sales of investment grade properties totaled only $2.9 million, less than half that posted in the previous two quarters. Trading partners: Northern Europe, Northeast Asia and India Cranes/post-Panamax Cranes: 20 | 20 Development Current channel depth: 45 feet at mean low water • Childress Klein Properties and Jamestown are jointly developing a 189,000-square-foot speculative distribution facility at Crosspoint, a 305-acre development within Palmetto Container terminals: 4 | Wando Welch, N Charleston, Columbus St, Union Pier Commerce Park. JAS Forwarding has leased 80,000 square feet to date. Expected delivery Post-Panamax ready: Access limited to 2 hour high tide window is February 2013. Class I Rail Operators: CSX & Norfolk Southern 32 Seaport Outlook ● Fall 2012 41 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Charleston Port ofof Charleston North Charleston Terminal Charleston Air Force Base James B. Edwards Bridge, air draft 155 feet CSX & Norfolk Southern intermodal rail yard Veterans Terminal Future container terminal Wando Welch Terminal Arthur Ravenel Jr. Bridge, air draft 186 feet Columbus Street Terminal Union Pier Terminal N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2011 market size vacancy absorption absorption of stock rents (NNN) rank 1.4 m 1.3% 0.7 m 26.9 m.s.f. 12.9% 5.5% 1.6 m.s.f. -0.2 m.s.f. -0.8% $3.80 10th 32 Seaport Outlook ● Fall 2012 42 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Oakland Port of Oakland Property clock Port Area Terminal 64.7 Market Score Operating Score Port of Miami 35.0 75.5 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • Since 1962, the port has spent more than $1.4 billion to construct 1,210 acres of marine Port of Charleston Port of Savannah terminals, intermodal rail facilities and maritime support areas. • In 2009, the port completed a dredging project that deepened its channel from 42 to 50 feet. TEUs versus port-market occupancy • In May of 2011, the port secured $18 million in federal funding for operations and TEUs TEUs Port-market occupancy maintenance from the Army Corps of Engineers. 3,000,000 100% • The Oakland City Council approved development plans for the conversion of the 366-acre former Oakland Army Base. When completed, the redevelopment could bring up to two 2,500,000 98% million square-feet of Class A logistics, distribution and manufacturing space to the port. 2,000,000 96% 1,500,000 Market conditions 94% • Distributors and third party logistics firms are at the forefront of rising demand. With large 1,000,000 block availabilities in short supply, development activity is underway. 500,000 92% • Occupancy within the port’s immediate vicinity is tight. Occupiers in need of institutional- 0 90% grade, Class A product are forced to look south down the 880-Corridor. 2007 2008 2009 2010 2011 2012 YTD • Rental rates have steadily risen in recent quarters as availability of Class A product dwindled. New speculative development by Prologis at the Oakland Army Base could generate lease rates well above current market levels. Port vital facts 2012 YTD volume: 1,350,846 (July) Development 2011 volume: 2,342,504 • There has been an influx of new capital to the Oakland / East Bay market in recent Main routes: Asia / Pacific quarters, supporting a broader recognition that the region’s industrial sector is recovering. • Goodman-Birtcher is on track to break ground on a 375,000-square-foot, Class A Trading partners: China, Japan, South Korea, Taiwan speculative warehouse / distribution facility in close proximity the Port of Oakland and Cranes/post-Panamax Cranes: 36 | 30 Oakland International Airport. This will be the first project of this size and quality to break Current channel depth: 50 feet at mean low water ground in the market in at least a decade. • Additional development, in conjunction with the City’s efforts at the Oakland Army Base, will Container terminals: 8 | STS/Evergreen, Hanjin, SSAT be necessary over the next 18-24 months to meet the growing need for Class A bulk Post-Panamax ready: Yes distribution space. Class I Rail Operators: Burlington Northern Santa Fe (BNSF), Union Pacific 32 Seaport Outlook ● Fall 2012 43 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Oakland Port ofof Oakland Oakland Army Base Redevelopment Berths 33-34 Ports America Outer Harbor Terminal TraPac Terminal Ben E. Nutter Terminal (STS/Evergreen) Union Pacific Intermodal Yard BNSF Intermodal Yard Total Terminals International (Hanjin) Oakland International Container Terminal (SSAT) Global Gateway Central Terminal (APL) Charles P. Howard Terminal (Matson) 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of July 2012 market size vacancy absorption absorption of stock rents (NNN) rank 2.3 m 0.5% 1.4 m 104.1 m.s.f. 6.2% 7.2 m.s.f. -0.6 m.s.f. 0.9 m.s.f. 0.9% $6.96 11th 32 Seaport Outlook ● Fall 2012 44 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Seattle Port of Seattle Property clock Port Area Terminal 64.6 Market Score Operating Score Port of Miami 36.3 73.0 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • Recently, the port has purchased and begun the installation of additional super post- Port of Charleston Port of Savannah Panamax cranes, adding to their already numerous post-Panamax crane inventory. The installation of the these cranes will allow the port to handle some of the largest ships in the TEUs versus port-market occupancy world. TEUs TEUs Port-market occupancy 2,500,000 100% Market conditions • While the port does have industrial distribution centers in its immediate vicinity, a majority of 2,000,000 98% the commodities are delivered further south into the Kent Valley’s distribution network. 1,500,000 96% • The warehouse vacancy in the immediate vicinity of the port is less than 2.0 percent and land constraints are halting any new industrial construction. Regionally, port-driven areas 1,000,000 94% such as the Kent Valley are benefiting, with declining vacancy and increasing demand. • Rental rates have been on a continual incline over the last six quarters across the market 500,000 92% • Leasing volumes have remained steady; however, as limited supply hinders demand in the 0 90% market, new developers are beginning speculative projects throughout the region. 2007 2008 2009 2010 2011 2012 YTD • Investment capital has been primarily coming from the port and the city of Seattle. • The most active industries leasing space have been distribution, logistics and transit- oriented business lines. Port vital facts 2012 YTD volume: 1,167,093 (July) Development 2011 volume: 2,033,535 • Port of Seattle / City of Seattle is the primary land owner in the port. Main routes: Puget Sound • Port jobs have been pressured by the talks of a new arena in the port area. A recent new article titled, “Jobs in the Balance: SoDo Jobs, Small Businesses, Industry squeezed by Trading partners: Asia, South America, North America, Europe proposed arena location,” shed light on the controversy. Cranes/post-Panamax Cranes: 27 | 27 • There is currently office, multifamily and potentially a basketball arena under development. Current channel depth: 50 feet at mean low water • There is no forecast speculative industrial construction near the port, as land is scarce and development is focused further south. Container terminals: 4 | 5,18,30,46 Post-Panamax ready: Yes Class I Rail Operators: BNSF, UPRR 32 Seaport Outlook ● Fall 2012 45 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Seattle Port ofof Seattle Puget Sound Downtown Seattle Elliott Bay Interstate 5 Terminal 46 Terminal 30 Terminal 18 BNSF Intermodal Yard Terminal 5 Terminal 30 N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2011 market size vacancy absorption absorption of stock rents (NNN) rank 2.0 m 4.9% 1.2 m 35.7 m.s.f. 3.0% 4.7% 0.8 m.s.f. 0.0 m.s.f. 0.0% $7.05 12th 32 Seaport Outlook ● Fall 2012 46 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port of Miami Port of Miami Property clock Port Area Terminal 63.4 Market Score Operating Score Port of Miami 38.0 67.5 Port of Seattle, Peaking Falling Landlord leverage Port of Tacoma Tenant leverage market market Rising Bottoming Port of Baltimore market market Summary Port of Oakland Port of Long Beach, Port of Virginia Port of Houston, Port of Los Angeles, Capital investments Port of Jacksonville Port of New York / New Jersey • Currently under construction with completion set for 2014, a new 3,900-foot tunnel would Port of Charleston Port of Savannah link the U.S. Interstate Highway System directly with port facilities. This will remove cargo traffic from Downtown Miami and improve transit times. TEUs versus port-market occupancy • The channel, which is currently 42 feet deep, now has received approvals to dredge to a TEUs TEU Volume Occupancy depth of around 50 feet. This will allow fully-laden post-Panamax vessels to call at the port 1,000,000 94% 900,000 following the widening of the Panama Canal. Estimated completion is in 2014. 93% 800,000 • The port is also restoring its freight rail service between the Hialeah rail yard and the 700,000 92% seaport network. Under a TIGER II grant, the U.S. Department of Transportation has 600,000 91% awarded $23 million for this project. 500,000 90% 400,000 89% 300,000 Market conditions 88% 200,000 • In anticipation of growth in international trade after the Panama Canal expands its locks in 100,000 87% 2014, thus far three ‘inland port’ projects have been proposed in southern Florida. 0 86% • Occupancy rates have hovered over 90 percent for more than three years. As market 2007 2008 2009 2010 2011 2012 YTD fundamentals continue to stabilize, we expect this rate to escalate toward 95 percent. • Rental rates in the industrial market of Miami-Dade County (the Port of Miami’s primary Port vital facts market) have consistently been rising over the past two years. Rents for Class A space has 2012 YTD volume: 455001 TEUs (June) increased by approximately 4.5 percent since last year. 2011 volume: 906,000 TEUs • Miami is considered by institutional investors as one of the top ten investment markets in the country. This increased buyer demand will drive average sales price per square foot to Main routes: Main Ship Channel, Fisherman’s Channel, Government Cut trend higher than the current, prevailing price of $85 per square foot. Trading partners: China, Honduras, Hong Kong, Guatemala, Dominican Republic Cranes/post-Panamax Cranes: 12 | 2 Development • Prologis, AEW Capital Management, TA Associates Realty, Seagis Property Group and Current channel depth: At MLW 28 - 42 feet IndCor Properties are some of the major asset owners in the region. Cargo terminals: 3 | Seaboard Marine, South Florida Container Terminal, Port of • Six speculative projects are under construction in industrial markets of Miami-Dade and Miami Terminal Operating Company Broward County, and additional speculative and build-to-suit projects are expected to break Post-Panamax ready: No ground in the next 12 months. Class I Rail Operators: Florida East Coast Railways 32 Seaport Outlook ● Fall 2012 47 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port Miami Port ofof Miami 395 Underground Tunnel Rail Restoration Project Construction Cruise Terminals Seaboard Marine Terminal SFTC Terminal Downtown Miami Deep Dredge POMTOC Terminal N 2011 Volumes 2011 Annual 2012 YTD (TEUs) Immediate Current Total availability 2011 Net YTD 2012 net Absorption as % Average asking Port (TEU's)▼ change As of June 2012 market size vacancy absorption absorption of stock rents (NNN) rank 0.9 m 6.8% 0.5 m 97.6 m 8.2% 11.5 m.s.f 0.9 m.s.f 0.6 m.s.f 0.8% $4.60 13th 48 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 49 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Port, Airport & Global Infrastructure report authors John R. Carver Craig S. Meyer, SIOR Aaron L. Ahlburn Daniel Fenton Director - Port, Airport & President Vice President Research Manager Global Infrastructure Americas Brokerage Leader Director of Research, Americas Industrial +1 305 423 4713 Logistics and Industrial Services Industrial +1 404 995 2353 email@example.com +1 424 294 3460 +1 424 294 3437 firstname.lastname@example.org License #: 00780358 email@example.com firstname.lastname@example.org License #: 00586344 Dain Fedora Ryan Harchar Taylor Odegard Mehtab Randhawa Elliot Williams Research Analyst Research Analyst Research Analyst Research Analyst Research Analyst +1 213 239 6262 +1 404 995 6509 +1 425 974 4013 +1 305 728 7397 +1 916 491 4322 email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com Contributors Patrick Latimer Craig Leibowitz Amber Schiada Geoff Thomas Jennifer Young Research Analyst Research Analyst Research Manager Research Analyst Research Analyst +1 410 878 4888 +1 201 393 6844 +1 415 395 4924 +1 804 200 6527 +1 713 888 4061 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org Lee Fittipaldi Research Analyst +1 610 263 5823 email@example.com 50 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 51 Jones Lang LaSalle • United States • Seaport Outlook • Fall 2012 Despite differing layers of connections between port throughput performance and leasing or development fundamentals, most of the prime U.S. industrial real estate in the trade areas around major seaports continues to outperform the market in general. 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