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E-Commerce Boom Creating Growth Boom for Top US Inland Port Markets

7/22/16

The rapid growth of e-commerce has fueled development of warehouses and distribution centers in the 12 primary U.S. inland-port markets at nearly twice the national rate, according to a new report from CBRE Group Inc. California’s Inland Empire is leading the pack due to its robust infrastructure and its close proximity to two major West Coast ports and the Greater Los Angeles area’s more than 13 million people.

Even with the surge in construction, demand for industrial buildings in those markets is so robust that nine of the 12 have seen their availability rates decline from their post-recession peaks faster than the national rate. The vacancy rate in the Inland Empire closed the second quarter at 3.7 percent, a level not reached in the market since early 2007.

“The Inland Empire, especially on its western edge, looks very much like an infill market, mirroring vacancy rates of submarkets farther west, such as Orange County and parts of Central Los Angeles,” according to Petra Durnin, CBRE’s head of analysis and research for Southern California.

By far the leading catalyst for the growth of inland ports is e-commerce, which has flooded U.S. seaports with an unprecedented volume of foreign cargo destined for markets across the U.S. That cargo is routed from seaports to nearby inland ports, which are major transportation hubs where cargo is handled, warehoused and broken into smaller batches for further distribution to consumers within that region.

“Inland ports account for more than half of the fastest growing industrial markets in the U.S. because they are key way stations in the national e-commerce distribution network,” said David Egan, CBRE’s Head of Industrial & Logistics Research in the Americas. “As online commerce continues to expand, more shippers, retailers and logistics firms will seek top-quality, big-box warehouses in the leading inland-port markets to serve as critical links in their supply chains.”

In the report, CBRE identifies the main inland ports in the U.S. based on their connection to major seaports, their transportation infrastructure and their close proximity to major population centers. Those are: Southern California’s Inland Empire; Phoenix; Dallas/Ft. Worth; Kansas City; Houston; St. Louis; Chicago; Memphis, Tenn.; Columbus, Ohio; Atlanta; Greenville, S.C.; and East and Central Pennsylvania.

Inland ports are defined as having a Class I rail connection to a major seaport and also having access to significant transportation infrastructure, be it rail, highway, waterway or a combination of the three.

Collectively, the 12 inland ports expanded their base of industrial properties by 2.7 percent in this year’s first quarter, far outpacing the national average growth rate of 1.6 percent, according to CBRE research. The fastest growing of the 12 were the Inland Empire (4.3 percent), Greenville (4.2 percent), Atlanta and Dallas/Ft. Worth (both at 3.6 percent).

Meanwhile, even with their rapid growth, many of those markets can’t keep up with demand. The inland ports with the least availability are Chicago (6.6 percent), Kansas City (7.4 percent) and the Inland Empire (7.6 percent).

“Inland-port markets have recovered faster than their non-port counterparts since the Great Recession,” said Scott Marshall, CBRE’s Executive Managing Director of Industrial & Logistics in the Americas. “These markets will hold their edge because they have sustainable advantages in their infrastructure, access to population centers and connections to major seaports to benefit them for the foreseeable future.”






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