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August 23, 2017

Even as hurricane season approaches in the United States, waves of structural change continue to jostle the global shipping industry. And that has an impact on warehouse and distribution space in and around major U.S. seaport industrial markets, and the inland logistics markets connected to them.

As the industry continues to shift through bankruptcies, mergers and consolidations, and the creation of new alliances, competition between ports is heating up and rail connectivity continues to draw importance. Larger capacity ships mean fewer port calls, which could translate into demand for logistics real estate in more major market clusters.

Likewise, the completion of the Panama Canal expansion has opened up new opportunities for East Coast ports – as well as for the rise of Gulf Coast ports as inbound shipping destinations. Additionally, the implications a NAFTA revision could have on the logistics market are yet to be determined.

Analyzing the ever-complex supply chain environment surrounding shipping and port-related real estate, JLL’s 2017 Port, Airport & Global Infrastructure (PAGI) Outlook outlines five key trends that will have a significant influence on the market over the near-term.

1. The Gulf Coast: A big winner

The decline in oil prices has fueled a boom in petrochemicals. The new demand has meant good news for much of the region, but especially Houston. Close proximity to Port Houston and cheap natural gas makes this a market to watch over the next couple of years.

2. Mergers and alliances continue to change the shipping landscape

As of April 2017, 90 percent of global trade is now concentrated through three alliances, instead of the previous four. These alliances help keep carriers competitive, manage capacity and control costs. In the coming months, expect a further reorganization of travel routes with a number of M&A’s in the works and an uptick in vessel sharing.

3. Larger ships docking in U.S. ports

Ocean carriers’ desire to have fewer but larger vessels in the water led many U.S. ports to invest in new cranes, dredge channels and remove any height restrictions like low bridges. As port visits are further reduced given the bigger capacity featured in these ships, expect regional port competition to continue amping up.

4. Next day delivery and autonomous vehicles

A jump in urbanization keeps driving e-commerce, and the trucking industry is having to adapt. Further dependence on new tracking technology, as well as the creation and implementation of self-driving trucks, looks to be the future. New trends like Uber Freight may provide additional temporary relief, but when will it be a reality on the roads? And how long can it last?

5. Rail needs to diversify to become more nimble

Even as growth continues and revenues rise, the rail industry is changing its game plan to stay ahead. Instead of relying heavily on traditional sectors like coal, railroads are shifting toward other industries to become more agile. It’s all an effort to operate at peak efficiency to compete with the large cargo volumes entering the U.S. via mega-ships.

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Aaron Ahlburn

Director, JLL Industrial Research

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