U.S. ports are expanding their capacity and infrastructure in spite of widespread declining volumes in anticipation of the widening of the Panama Canal in 2014.

The top 13 U.S. ports alone will pour roughly $8.5 billion into container terminal and harbor dredging projects during the next five years, estimates Chicago-based real estate services firm Jones Lang LaSalle (JLL) in a new report. That amount totals nearly a quarter of the U.S. ports’ investment in capital projects since 1945, according to the American Association of Port Authorities.

Eleven of the top 13 ports experienced a decline in volume from 2008 to 2009. Altogether, their volume dropped 18.5% as both domestic and foreign consumption waned in 2008 and 2009, according to JLL’s new Port, Airport and Global Infrastructure Outlook.

But not all major ports experienced declines. Two managed to raise their volume levels. The Port of Jacksonville, Fla. recorded impressive 8.2% TEU (20-ft. equivalent units) container growth in 2009, by far the largest of any major port. Houston was the only other port to see positive growth at 0.1%.

“Fortunately, trans-Pacific U.S.-bound trade from Asia started to recover in the second half of last year, and has started to show a positive impact on West Coast ports,” says John Carver, head of the ports, airports and global infrastructure group at JLL. West Coast port traffic is up 14.8% year-to-date in 2010, he adds.

As for the growing Florida port, “Jacksonville is positioning itself as the first port of call from the Panama Canal on the Atlantic Ocean side,” says Carver.

Still, demand for warehouse and distribution space around U.S. ports remains at critically low levels. U.S. port vacancy rates escalated from 2008 to 2009 from 7.4% to 9% as tenants shed excess space, consolidated operations or ceased business altogether, according to the report.

“Asking rents declined by an average of 7.1% with the largest losses in the markets surrounding the ports of Los Angeles and Long Beach (Calif.), and Charleston (S.C.),” says Craig Meyer, managing director and head of JLL’s Americas Industrial Services team.

It’s no surprise these three ports posted the highest year-over-year losses from 2008 in total container volumes, demonstrating the integral relationship between port through traffic and industrial vacancy rates,” says Meyer.

New port index

JLL released its first U.S. Port Index last week as part of the ports and infrastructure outlook. The port index combines measurable port and commercial real estate metrics. Each port was given 30 base points and could score a possible 100 points. The combined Los Angeles and Long Beach ports, the largest U.S. ports by volume, scored highest with 91.4 points.

Along with TEU volumes and port growth rates, the index takes into account factors such as land value-to-lease rate ratio and local vacancy rates. Other elements of the rating process include planned infrastructure investment, labor costs and the availability of on-dock or near-dock service by Class-I railroads.

The Port of Charleston ranks lowest among the top 13 U.S. ports with a score of 73.0 points. The port’s volume dropped 27.8% from 2008 to 2009.

Strategic alliances

With the widening of the Panama Canal only four years away, U.S. ports are forming relationships with other port authorities to ensure increased market share in 2014. As early as 2003, U.S. ports including Houston and Virginia signed agreements with the Panama Canal Authority. The agreements promote the all-water route between Asia and the East Coast. Several Gulf Coast ports also signed memoranda with the Panama Canal Authority in April.

In response, the six West Coast ports banded together, along with the BNSF Railway Co. and Union Pacific Railroad, last November to form the U.S. West Coast Collaboration. The ports and railroad companies pledged a commitment to each other to remain the preferred gateway for Asian cargo by improving port and rail infrastructure.

The port of Long Beach, for example, has broken ground on a $40 million harbor dredging project that will deepen its main channel to 76 feet to accommodate the deep draft Panamax ships that hold more than 14,000 TEUs. The project, along with several others, is part of the port’s $3 billion commitment to container terminal and infrastructure advancements during the next ten years.

Meanwhile, the port of Los Angeles received a $22 million grant for improvements along Harry Bridges Boulevard, a key roadway to the port. The project is scheduled to be completed in 2012.

“With the increasing interdependence between global economies, the need for infrastructure improvements and the rapid movement of goods will put increasing pressure on U.S. ports to secure long-term capital access to financing from both the public and private sectors,” says Carver.

“There are great long-term opportunities on the horizon for port real estate leasing and investment,” says Meyer. “Not just the main ports like New York/New Jersey or Los Angeles and Long Beach, but also the emerging ports like Mobile (Ala.), Gulfport (Miss.) and Port Manatee (Fla.) on the Gulf Coast.”

Southeastern ports

Although the Gulf Coast is still facing the Deepwater Horizon oil spill, area ports have remained open. “We see no reason to close [the Port of Mobile] or divert traffic,” says James Lyons, director and chief executive officer for the Alabama State Port Authority.

“With contingency plans in place to handle vessels in the event heavy oil hits our channel, we do not foresee any reason to close the port and further disrupt our economy.”

Containerized cargo growth has been exponential at the port of Mobile, growing from 23,960 TEUs in 2003 to 129,119 TEUs in 2008 as it converts itself from a bulk port to a container port. “From a real estate perspective, container ports generate more vertical development of logistics and warehouse distribution facilities,” says Carver.

On the East Coast, Hanjin Shipping Co. in Jacksonville is developing a $300 million container terminal at Dames Point that will open in summer 2013. The Jacksonville Port Authority recently sold 38 acres of riverfront property to Keystone Coal Co. for the creation of a $20 million coal terminal. The property is adjacent to 70 acres that Keystone already owns.

Further north, Savannah can boast five consecutive months of double-digit growth through May 2010. With an 11.5% compound annual growth rate since 2000, Savannah is pushing for a harbor deepening to 48 ft. to ensure that larger vessels can be accommodated.