According to the latest report from CBRE Group, Inc., Transportation Cost Equivalence Line: East Coast vs. West Coast Ports, the ever-evolving global supply chain is prompting distribution companies that process freight shipments between the U.S. and Asia to optimize their U.S. industrial real estate portfolios to increase efficiencies and cost savings.
These companies are heavily scrutinizing transportation costs in East Coast and West Coast seaports--and inland cities with strong transportation links--locating facilities in markets best able to serve established and emerging "megapolitan" areas in a quick, cost-effective manner.
"Distribution and fulfillment users need a real estate footprint that allows them to move freight through the U.S. transportation network as fast as economically feasible," said Scott Marshall, Executive Managing Director, Industrial Services, Americas, CBRE. "Future location decisions will largely be driven based on population growth--the East Coast and West Coast ports with the infrastructure and transportation links to serve the largest and fastest growing regions in the country will also be home to strong-performing industrial real estate markets."
Between 2005 and 2040, the U.S. population is expected to grow by 100 million people--60 million of which are expected to reside within 20 markets characterized as megapolitans. These megapolitan markets comprise cities and counties linked by shared transportation networks, labor markets and/or water supplies. These 20 megapolitan areas, which can be further combined into 10 clusters, are projected to house about two-thirds of the U.S. population by 2040 and will capture the lion's share of total investment dollars spent on development and growth.
The impact of population shifts on supply chain networks and industrial real estate in the coming years will be significant. However, the additional volume moving through these megapolitan regions could result in increased congestion and loss of productivity. As such, the continued investment in transportation infrastructure is crucial.
In order to capitalize on the greater container volume that will soon traverse the expanded Panama Canal, many seaports have recently invested millions in infrastructure, creating alternative transportation solutions including short haul rail and barge systems to accommodate post-Panamax ships. However, the expansion of the Panama Canal is not expected to have a major impact in the movement of freight within the U.S., as separate strategies are required for high-value, time-sensitive freight (quicker delivery) and for low-value, low-cost freight (cost effective delivery).