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Area Development - Site Selection, Facility Planning and Workforce Development

Report Reveals How U.S. Firms Can Capitalize on New Panama Canal Expansion

06/06/2011
With the $5.25 billion Panama Canal expansion project under way, American companies are now trying to figure out the best means to capitalize on the larger ships soon to be heading towards the U.S. A new report by Jones Lang LaSalle--a financial/professional services firm specializing in real estate-has identified three major trends that U.S companies should consider when evaluating their real estate and supply chain options.

"The expansion will allow the Canal to accept ships nearly twice the size of current capacity allowance. This is likely to forever change the U.S. port system as we know it today," said John Carver, head of Jones Lang LaSalle's Ports Airports and Global Infrastructure group. "With the Panama Canal project under budget and on target to open in 2014, the amount of growth and investment within the broader logistics universe will be exponential, impacting everything from shipping and rail line construction to warehousing and terminal development around the world."

Trend #1: Oil price volatility and slow steaming = more storage.
Higher fuel costs are driving shippers to adopt slower delivery times through fuel conservation and slower shipping speeds. "Manufacturers and retailers must store merchandise longer to keep inventories buoyant," said Carver, "and this will increase demand for warehouse and storage space near ports."

Trend #2: Increased competition between ports to receive larger ships.
With larger vessels sailing through the expanded Panama Canal, they are likely to make fewer ports of call. Consequently, there will be winners and losers along the U.S. Eastern Seaboard. "The demand for industrial property around these receiving ports both inland and coastal is surely to rise," noted Carver. U.S. ports gearing up to cater for the next generation of vessels has created "new opportunities" for "new solutions" to port expansion projects through public-private partnerships.

Trend #3: Shippers to employ port diversification strategies.
The Canal expansion is causing companies in both port and inland markets to re-examine their logistics processes and facility positioning, said Carver. "A competitive edge for many companies is becoming increasingly realized through effective supply chain management. We have seen the recent industrial real estate resurgence materialize by way of a `coast inward' recovery. If anything, the expanded canal will give companies access to more options as they contemplate their supply chain strategies and post-2014 real estate requirements."

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