Port-Proximate Real Estate Continues Cooling Trend

Port-proximate real estate demand continues to cool despite increased cargo throughput at top US ports as retailers shift their inventory strategy, according to a Cushman & Wakefield report.

Many retailers that leased excess space to shore up their supply chains during the pandemic are reverting to just-in-time inventory strategies, said Jason Price, senior director and Americas head of logistics and industrial research at Cushman & Wakefield.

“We expect demand to remain soft in the near term before the market inflects in 2025,” said Price.

Twenty-Foot Equivalent Units (TEU) volumes at key North American ports climbed through the first seven months of this year, compared with modest totals through much of last year, driven by rising import totals. Cushman & Wakefield attributed this trend to a resilient US economy despite relatively flat retail sales when adjusted for inflation.

The International Longshoremen Association strike, which lasted just a few days, also drove volume as shippers rushed to bring goods into the country before the September 30 contract expiration.

“While import volumes edged higher across key U.S. ports, this has not affected their respective warehouse markets, many of which have experienced limited or negative net absorption since early 2024,” said Price. “However, some port-proximate markets continued to see healthy demand.”

The healthiest absorption totals through the first half of 2024 were in Houston (9.9 million square feet), Savannah (7.3 million square feet) and the Inland Empire (2.8 million square feet). These markets were helped by new construction deliveries with tenants in place. Many port markets, however, experienced more modest construction totals. In Los Angeles, Oakland/East Bay, New Jersey and Seattle, new construction deliveries accounted for less than 4% of inventory.

Across the country, 856.6 million square feet of new supply were delivered from 2023 to mid-2024. Developers have been focused on delivering Class A supply amid a cooling trend, the report said. During that time, deliveries accounted for 4.9% of the US inventory total, but the pipeline has substantially dissipated, down 46% year-over-year.

Industrial rental rate growth has moderated across port markets, with most West Coast ports reporting notable year-over-year declines as demand slipped and vacancies climbed, according to Cushman & Wakefield.