Port Trends to Watch
The Port of New York and New Jersey (PNYNJ) has consistently been the busiest port on the East Coast, serving as a key gateway. With six container terminals and multiple cargo rail lines, the PNYNJ services one of the world’s wealthiest and most dense consumer bases. The Port has the largest 250-mile radius population of any port in North America, with 61 million people making up one-third of the country's GDP. Railways from the Port can also reach the Midwest, Canada, and the greater Boston area.
Container volume at the Port of New York and New Jersey rebounded above the 600,000 TEU mark for the third consecutive month after falling below this figure in February and March. Total mid-year volume reached 1.9 million TEUs, down by 24.5% year-over-year (YOY) but up 11.0% from the first half of 2020. The recent decline can be attributed to the cooling economy and lingering inflation, pushing demand for goods down. On the other hand, the consistently strong U.S. employment report and stabilizing freight and energy costs hint that levels have normalized after record increases in 2021 and 2022.
Import cargo volumes are expected to rise in the coming months as retailers prepare for the winter holiday season. Additionally, labor negotiations for the West Coast Ports and United Parcel Service (UPS) have reached tentative agreements, thwarting the threat of supply chain disruptions during the second half of the year.
The Greater Port Region Warehouse Market
The Port of New York and New Jersey serves one of the world’s most concentrated and affluent consumer markets. The Port Region is one of the most mature submarkets in New Jersey and has seen demand for space increase as cargo volumes and ship sizes grow in response to heightened consumer demand. The submarket offers tenants a superior location within proximity to the New Jersey ports and the busiest thoroughfares in the State.
The vacancy rate in the Port Region climbed by 360 basis points from last year to 4.7%, driven by the delivery of new product to the market. Net absorption turned negative in the first half of 2023, as year-to-date net absorption reached negative 253,554 sf. Similar to the overall market, leasing activity has reverted to pre-pandemic norms after demand spiked in 2021. At 749,248 square feet (sf), mid-year 2023 leasing activity is down 34.0% from the same time last year. Tenant demand and asking rent increases in the Port Region are driven by container activity at the PNYNJ, leading to a record asking rent swell of 68.2% YOY to a new high of $21.10 per square foot. Both asking and taking rents have surged briskly over the last year, specifically within centrally located new developments and higher-quality space.
