Total Impact of Panama Canal Widening May Be Delayed

Hotchkiss: “The Canal is finished and open, but certain factors are not yet in place, which is not giving us a clear picture of how business will be.”

LOS ANGELES—It may be a while before the full effect of the Panama Canal ‘s widening, which was completed in late June, is felt by both coasts’ ports, the business world and the industrial real estate sector, Colliers International ‘s head of national industrial services Dwight Hotchkiss tells GlobeSt.com. Two recently published articles by the firm’s director of national industrial research James Breeze posited on the possible effects of the Canal’s expansion. One says several macro factors could hinder the full impact of the expansion, including the anti-globalization trends demonstrated by Brexit and the necessary infrastructure improvements to some of the East Coast ports that will need to be completed before they are operating at full capacity; another looks deeper at the factors behind those East Coast port are in expansions. Just how the Canal expansion is going to affect the ports, industrial real estate and business in general has been “the $100,000 question ever since the concept of the Canal widening came around,” Hotchkiss tells us. “There have been major swings and views on how much business would be lost on the West Coast and how much growth would be seen on the East Coast. The West Coast ports have invested billions of dollars to upgrade, and conversely, the East Coast ports haven’t had the super tankers traverse through there and have been working furiously to create the infrastructure to support these big cargo ships coming in.” Hotchkiss says he expects the widening to create a 10% increase in business through the East Coast ports, but he thinks it will have minimal or no impact on the West Coast ports. In addition, he says it may take some time for it all to shake out and the full effect is known. “The Canal is finished and open, but certain factors are not yet in place, which is not giving us a clear picture of how business will be. For one, there has been a major drought in Panama, creating lowered water levels in two main lakes in the Canal, which has led to the channel not being deep enough for tankers to enter. That will affect how much business can go through there in the near term.” Hotchkiss echoed Breeze’s sentiments about global skepticism and the port upgrades in Savannah, Charleston and Richmond having some impact on business. “They’re working hard to deepen their ports. Also, in the New York and New Jersey ports, there are issues with the Bayonne Bridge , so shippers may have to wait to use that port because they won’t be able to get into it.” So, what effect will the Panama Canal’s widening have on industrial real estate on both coasts? Hotchkiss says in the long term, we will probably see some industrial developers looking at doing additional development in the Charleston, Savannah and Richmond markets; New York and New Jersey are built out, so there’s no issue there; and on the West Coast, the L.A. and Long Beach ports, which would be most affected, will not likely see business dropping off from the widening. “I don’t see a negative effect on the West Coast markets. I see it boosting East Coast markets, but the West Coast markets will maintain the base they’ve had.”