The Southeast’s increasing relevance in the global marketplace is due in large part to the success of its ports. Internationally recognized companies like BMW, Boeing and Walmart have expanded in the Southeast to operate closer to the ports handling their imports and exports.
According to JLL’s Port, Airport & Global Infrastructure research division, volume of twenty-foot equivalent units (TEUs) in 2013 at 13 seaports across the country was 3.3 percent higher than in 2007. TEU volume at West Coast seaports dipped by 6.8 percent in that period, while East Coast ports exceeded their 2007 volumes by 19.1 percent.
The large spike of activity for East Coast ports in the past seven years has resulted in a windfall of industrial tenants expanding in and around the ports.
Three of the largest Southeastern ports in terms of capacity are the Port of Charleston, PortMiami and the Port of Savannah. Each have been a boon to the industrial market in their respective state, and with the expansion and harbor deepening projects underway at each port, each should only escalate their importance in the coming years.
In the Driver’s Seat
The South Carolina Ports Authority (SCPA) is currently in a growth mode with container volumes for October up nearly 17 percent year-over-year. For the fiscal year to date, volumes in TEUs for South Carolina ports, primarily being shipped through the Port of Charleston, are up 14 percent. The SCPA is planning to invest nearly $1.3 billion during the next decade on capital improvement projects, including new development and enhancements of existing facilities.
The port, both directly and indirectly, has attracted industrial tenants to the region. SCPA doubles as an economic development agency, offering incentives for companies to use its services.
“We work very closely with the Governor’s office and the South Carolina Department of Commerce on the recruitment of companies that will utilize the port,” says Jack Ellenberg, senior vice president of economic development and projects at SCPA. “It all boils down to volume growth and our ability to grow our volume, because that’s going to determine whether we are successful long-term or not.”
The industry that is driving the growth of the ports is the automotive industry. BMW has been in South Carolina’s Upstate market for 20 years and has invested more than $6 billion over that time frame into its operations in the state. With such a large manufacturing base in the state, the port is vital to the company to import raw materials and components and export finished automobiles to the world marketplace.
“We’re in a position of strength: about 40 percent of all automotive products that come into the East Coast come through Charleston,” says Ellenberg. “It’s not exclusive to BMW. We handle import containers that feed the production process at the Mercedes-Benz plant in Alabama.”
As an offshoot of BMW’s presence in South Carolina, other businesses critical to car manufacturing have blossomed in the state, creating a network of interconnected partners that are all utilizing the port. South Carolina is widely considered the tire capital of the world, with companies like Michelin, Bridgestone-Firestone and Continental Tires staking a large industrial claim in the state. More tires are produced in South Carolina than any other state in the United States, according to Ellenberg.
Bridgestone opened its 1.5 million-square-foot industrial facility in Graniteville, South Carolina in November 2014. The $1.2 billion project is the company’s second tire manufacturing plant in Aiken County and its inaugural giant, off-road radial tire plant. The project is expected to create 850 jobs, which will push Bridgestone’s employee base in Aiken County to 2,000 jobs.
Besides the automotive industry, the Port of Charleston is also a key cog for manufacturers looking to be part of Walmart’s “buy America” program, whereby the retail giant has committed to purchasing $50 billion in American-made items over the next 10 years.
“Several manufacturers have been coming to South Carolina to keep that Walmart business,” says Shaun Kirchin, vice president of Binswanger’s Columbia office. Binswanger is a commercial real estate services firm primarily serving the industrial real estate market in the United States. Kirchin points to TV manufacturer Element Electronics and bicycle manufacturer Kent Bicycles as recent examples of this reshoring trend.
“As one of the few television manufacturers in the U.S. today, Element Electronics came back to South Carolina to provide TVs to Walmart. Kent Bicycles over in Manning previously made bikes in China, but it came back to South Carolina to keep that Walmart business,” says Kirchin.
Manufacturers are utilizing the port and its infrastructure to grow their business. According to Ellenberg, such port-dependent investment in South Carolina, meaning the investment from outside companies like Element Electronics and Kent Bicycles that utilize the port, is about $8 billion over the past three years.
“Companies using the port actively are expanding their footprint in the region,” says Ellenberg. “It’s a wide range, from new companies like Element Electronics to BMW.”
Speed to Market is Critical
PortMiami is currently undergoing more than $2 billion in infrastructure projects, including dredging the South Channel to 50-52 feet, new cranes for post-Panamax vessels, a recently opened restack facility and a new tunnel that directly links PortMiami to Florida’s interstate highways. As a result of these investments to improve efficiencies, transportation logistics is taking off in Miami, according to Donna Abood, principal and managing director of Avison Young’s Miami office.
“The goods are getting to the road faster and as a result, the growth industry we see happening here is in transportation logistics,” says Abood. “The timely loading and unloading of cargo and the direct efficiencies as a result of the goods getting to market faster are byproducts of the tunnel and port.”
The new tunnel is helping cargo companies get their first shipments earlier, thereby increasing the port’s speed to market, which is critical for PortMiami since it’s a hub for perishables like fruits and vegetables.
“South Florida is a pretty big market for perishables because of the proximity to Central and South America,” says Wayne Schuchts, principal of Avison Young’s Miami office. “The port itself has added state-of-the-art fumigation and refrigeration services.”
In the summer of 2013, PortMiami expanded its on-port fumigation facilities to improve its capacity for fresh produce from 600 pallets of fruits and vegetables per day to 6,000, according to PortMiami. The resulting improvement has allowed produce to reach the marketplace faster.
“Perishable products are now getting into the grocery lanes and on the streets to the consumer much faster and they’re fresher,” says Abood.
Besides perishables, other industries using PortMiami include apparel, textiles, paper, electronics, construction and transportation, according to Schuchts. The port has experienced a 13 percent jump in cargo growth in the past four years, which correlates to more demand for warehouse space in Miami. According to Marcus & Millichap, net absorption in Miami’s industrial market in 2014 is expected to reach 2.8 million square feet. Seeing if tenants can sustain that demand with the addition of new supply hitting the market this year should be a big story for Miami, according to Schucts.
The capital expenditure projects at PortMiami will help support the growth of industrial tenants in South Florida going forward. Items like perishables won’t be parked in warehouses necessarily, but the facilities supporting the growing port should flourish, according to Abood.
“There’s going to be a significant amount of growth in the industrial market as a result of the growth that’s happening at the port,” says Abood. “The industrial facilities that handle cargo and the shipments that come in for processing for them to get back on the street via rail, those facilities are going to grow.”
Breaking Records
Touted as the largest single-container terminal in North America, the Port of Savannah is a significant market-maker in the Southeast. The Georgia Ports Authority reports that the port handles roughly 13.3 millions of tons annually, making it the second-busiest container exporter in the United States, only trailing Los Angeles. In the month of October, the port terminals in Savannah and Brunswick moved a combined 2.8 million tons of freight, a record for the Georgia Ports Authority.
Industries using the port and increasing their activity include food, retail and household consumable products, according to Stephen Grable, senior vice president of JLL’s Atlanta office.
“An [undisclosed] national toy company has significantly increased its TEUs coming in this year, and there are situations where retail-driven house companies have doubled TEUs coming into the Port of Savannah,” says Grable.
The record growth of the port has a significant impact on the industrial market in and around Savannah, as well as metro Atlanta. Retailers like H.H. Gregg, Dick’s Sporting Goods and Walmart have been actively increasing their warehouse/distribution in metro Atlanta and are using the port to import their goods. A number of 1 million-square-foot spec industrial projects are coming on line in 2015 — JLL is currently tracking 12 million square feet of space either planned or currently under construction.
“All of these companies [using the port] are continuing to warehouse either in Savannah or they’re bringing their business to metro Atlanta. We’re on fire in terms of the activity we’re seeing,” says Grable.
The industrial market supporting the port is sizable. There is currently more than 3 million square feet of warehouse space available within 30 miles of the port. According to the Georgia Ports Authority, the Port of Savannah has the largest concentration of import distribution centers on the East Coast.
Food is a very important component to the success of the Port of Savannah. The port handles roughly 40 percent of the U.S. containerized poultry exports. Like PortMiami, the Port of Savannah is also a big perishable importer and exporter due to the massive agriculture and farming industry in Georgia. The Georgia Ports Authority is also participating in a U.S. Department of Agriculture pilot program whereby the Port of Savannah is now handling fruit from South America that has undergone cold treatment.
Like PortMiami and the Port of Charleston, the Port of Savannah is also undergoing a $706 million harbor deepening program to handle post-Panamax vessels. The U.S. Army Corps of Engineers, a partner on the project, estimates that the dredging will bring $174 million in annual net benefits and the extra depth will allow for an additional 3,600 cargo containers in each transit, a 78 percent increase.
— John Nelson