Northeast Real Estate Business

NOV-DEC 2015

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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Page 51 of 64 Northeast Real Estate Business • November/December 2015 • 51 Union (ILWU). An ongoing dispute between PMA, which represents the shipping in- dustry along the West Coast, and the ILWU, which represents West Coast dockworkers, slowed traffc coming into the ports in 2014, drastically snarl- ing trade operations up and down the coast. After nine months of negotia- tions, the parties were able to reach a tentative agreement in February 2015 that allowed the ports to resume full operations. However, the damage had already been done as many users had diverted traffc to the East Coast dur- ing that period. "This had a huge impact on all the ports up and down the East Coast," says David Egan, head of industrial research for the Americas region at CBRE. "Importing goods from Shanghai through Southern California, and then utilizing intermodal rail to reach New York, is historically faster and cheaper than a Suez Canal or Panama Canal transit to the East Coast," adds Mark Levy, managing director and the Mid- Atlantic logistics and industrial prac- tice group leader for Jones Lang LaSal- le. "However, the Southern California entry fell under harsh scrutiny during the last round of ILWU and PMA ne- gotiations when congestion and dray- age rates temporarily skyrocketed." According to Egan, balance is be- ginning to be restored between the two coasts now that the dispute is re- solved. However, some users who saw signifcant losses to their business dur- ing that time — as their goods sat on boats instead of in their warehouses or stores — are re-evaluating how they bring product into the country, which could permanently beneft the East Coast. "Users are thinking about risk miti- gation," Egan explains. "They realized that if it takes a few extra days and it's a little more expensive to bring their goods through Savannah or New York rather than the West Coast, it's better than missing a cycle or two of their business like they did last year." Levy agrees. "Speed, cost and reli- ability ultimately infuence a supply chain executive's goods movement strategy," he says. "TEU growth at East Coast ports will continue as ship- pers diversify their points of entry as a means to help mitigate potential sup- ply chain disruptions." Supply Chain Evolution The evolution of that supply chain — how users are entering the coun- try with their goods and distributing them to consumers — is not only a key driver behind port activity, but overall logistics and industrial activity as well. In today's speed-to-market world, companies are looking to create a stra- tegic network of facilities, both large and small, in a wide variety of loca- tions, so they can more quickly reach their consumer populations, Egan says. "As consumers, we want our stuff and we want it now," Egan adds. "On top of that, we want it as inexpensively as possible." In the Northeast, this trend is trans- lating to a strong industrial market, which is being driven by e-commerce and logistics companies that want to be located near the region's dense population centers and have easy ac- cess to the port. "It's a very active market," says Stan Danzig, executive vice president with Cushman & Wakefeld. "It's on an up- ward trend in terms of rents increasing and vacancies decreasing — and user demand certainly is driving that. The market, in general, is trending toward a landlord market." Egan agrees. "We've seen quarter after quarter of positive net absorp- tion since the recession ended in mid- 2010," he says. "The most recent third quarter was consistent with this trend. There's strong tenant demand, and new deliveries are trailing net absorp- tion by a factor of about two-to-one. It's a really good sign." Active Markets Northern New Jersey seems to be the market of choice for e-commerce and logistics companies looking for space in the Northeast, due to its prox- THE PORT EFFECT INDUSTRIAL from page 1

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