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Home » L.A./Long Beach is top seaport for industrial property investment and development
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L.A./Long Beach is top seaport for industrial property investment and development

June 23, 2010
Mark B. Solomon
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Which port city is considered the most desirable for industrial property investment and development? The Los Angeles/Long Beach port complex on San Pedro Bay gets the nod—despite controversy over environmental policies and concerns that the 2014 opening of the widened and deepened Panama Canal will divert cargoes away from their docks.

That is the assessment by the industrial real estate developer Jones Lang LaSalle (JLL), which earlier this week issued its first-ever index rating U.S. ports on their attractiveness as industrial property markets. The index was included in the company's annual Port, Airport and Global Infrastructure (PAGI) report.

JLL used seven criteria to develop an industrial property index for each port market: Twenty-foot equivalent unit (TEU) container volumes; TEU growth rates; the ratio of land value to lease rates; vacancy rates; planned investment in infrastructure; labor costs; and the access of on-dock or near-dock service to the country's Class I railroads, said John R. Carver, head of port, airport, and global infrastructure and the executive in charge of the index.

Each port or port complex was given 30 points to start; the seven criteria were ranked on a scale of one to 10, with 100 points the highest possible score.

Among the top 12, L.A./Long Beach scored the highest with a rating of 91.4, the only one to score over 90. That was followed by the Port of New York and New Jersey at 89.5 and Savannah, Ga., at 86.3 points. The ports of Charleston, S.C., and Baltimore, Md., brought up the rear with scores of 73 and 73.8, respectively.

L.A./Long Beach's 2009 volumes of 11.8 million TEUs, which dwarfed the traffic of any rival, was an element in its favorable ranking in the index but was not the only factor in its favor, Carver said. For example, that port market has the lowest vacancy rate in the nation at 6.6 percent, a sign that despite pronounced declines in container traffic last year, developers, investors, and tenants still find the region's population base and purchasing power to be powerful lures, the report said. (The Port of Savannah, which ranked third in the overall index, had the highest vacancy rate at 17.6 percent. This was due to an oversupply of bulk warehouse space that was developed on a speculative basis just as the global recession was starting, the report said.)

Asking rents in the Los Angeles basin have also held up strongly despite the economic weakness, according to the JLL index. Two prominent logistics firms, which JLL wouldn't identify, recently signed leases for 600,000 square feet of space for $7.20 per square foot. That is higher than the asking rents at the other 11 seaports surveyed; the closest is the Port of Miami at $6.77 per square foot.

The San Pedro Bay ports have been at the center of a long-running legal battle between local officials and the trucking industry over the constitutionality of the Port of Los Angeles' clean air plan, a sweeping initiative that truckers see as unlawful interference in interstate commerce by a local government.

There are also worries that the Panama Canal expansion, which is expected to double the Canal's total capacity when the work is completed by 2014, will drive importers to choose more all-water routings for Asian cargoes bound for East and Gulf Coast points rather than ship through the West Coast and move freight by rail or truck to inland points. Carver said he does not expect the Southern California ports to suffer meaningful traffic erosion as a result of the Panama Canal expansion.

Transportation Maritime & Ocean Global Logistics Logistics Network Design
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Marksolomon
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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