The $5.25 Billion widening of the Panama Canal is scheduled to be completed in the Summer of 2015. This event is already affecting global trade routes. More importantly, it is affecting various cities in the USA in positive and negative ways.
In our day-to-day appraising it is difficult to see how an event in Panama can affect the value of the property we are appraising today. Hopefully, we have learned that national and international events routinely alter our local market conditions – e.g. The 2008 Credit Crisis, The Euro Debt Crisis, etc.
Until the project is completed, the ‘Panamax’ fleet of ships has been sailing thru the canal. The new post-Panamax vessels are much larger. For perspective, to unload these new 10,000-container vessels it will take either 18 trains, 5,800 trucks or 570 Boeing 747 jumbo jets! In 2012, 14,544 cargo ships sailed thru the canal. That is a lot of cargo being transported between the Atlantic and Pacific Oceans.
The most obvious cities to benefit from the widening are those with major ports. Analysts expect Norfolk (Virginia) to benefit the most. Projects at this port are already completed and new rail systems have been put in place. When 2015 arrives, Norfolk will be ready, willing, and able.
Two other ports have also completed their expansion projects – the Ports of Baltimore and Miami. Miami does not have as deep of port as Norfolk, but it is obviously closer to Panama, thus saving transit time. Baltimore is at a disadvantage being near the head of Chesapeake Bay.
The busiest port on the East Coast, Port of New York/New Jersey, will not benefit from the widening anytime soon. The Bayonne Bridge must be raised to allow passage of the new taller vessels. This $1 Billion project will not be completed before 2016.
Also, environmentalists have filed lawsuits to keep the Port of Savannah (Georgia) from deepening its channel.
Coastal cities won’t be the only markets affected by the increase in shipping. Inland cities with intermodal transport established and significant rail operations will also benefit. It is less obvious which inland cities will or will not benefit.
KC Conway of Colliers International published a great report on the subject of which cities are best positioned to take advantage of the canal widening. I encourage you to get a copy of this report and see if your market is mentioned. It is rare that we have the opportunity to know of a significant market change 2+ years in advance. Don’t be surprised when the new canal opens in 2015!
George R. Mann, CRE, FRICS, MAI