HomeReal Estate NewsIndustrialAs shipping increases, space for containers becomes more scarce

As shipping increases, space for containers becomes more scarce

Online shopping increased significantly during the COVID-19 pandemic, creating a greater need for warehouses and fulfillment centers. The rise in e-commerce has now created a new issue—a lack of space to store shipping containers, The Wall Street Journal reports. Today, logistics companies and port operators are doing what they can to lease vacant land that’s near container terminals. The sudden land rush has increased rents and property values and led to greater investment in coastal outdoor-storage properties.

Lot space is a hot commodity

If a lot has room to store loaded shipping containers, it will be in high demand, if it isn’t already, according to The Wall Street Journal. The Georgia Ports Authority said it has leased six lots in Georgia, Alabama and North Carolina and turned those lots into pop-up container storage facilities. Savanah is one of the biggest and fastest growing ports in the U.S. but does not have the room to store the increasing amount of containers that are showing up at the city’s terminals.

Typically, loaded containers would sit at port for four to five days before it went elsewhere, according to port’s regional manager, Thomas Wyville. Today, containers usually remain for eight to 10 days. The extended time causes a backup because there’s less room for the next batch of ships to drop off their cargo.

“You have to get the containers off the terminal,” Wyville said. The pop-up facilities are meant to help with that.

Low supply and high demand lead to higher costs

Rents for locations near ports in dense urban areas with less vacant land, like Long Beach, CA, are rising the fastest. Meanwhile, the vacancy rate for industrial real estate in Los Angeles was 0.5% during the first quarter, according to CBRE Group Inc.

“In Los Angeles, unless you dig up some more ocean, you don’t have any more terminals, and it’s the same thing in New York and New Jersey,” Curtis Spencer, chief executive of customs and logistics consulting firm IMS Worldwide Inc., told The Wall Street Journal. IMS is involved in a container-transfer development in Southern California’s Inland Empire.

Meanwhile, logistics companies are feeling the pain from increased demand and a limited workforce while also struggling to get containers out of a port quickly. There just are not enough sites near ports that are big enough to easily access roads or rail. Problems compound because local zoning rules often restrict heavily industrial use, according to The Wall Street Journal. It’s also illegal to stack containers on top of one another.

Sites that can operate within local zoning regulations, have ample storage space, can move containers away quickly and are close to efficient transportation modes are in a position to increase their rents. Such sites are few and far between, however.

“We’ve seen a tremendous amount of demand for these locations,” co-managing partner of real-estate investment firm Alterra Property Group Matthew Pfeiffer told The Wall Street Journal.

Alterra Property Group owns a number of outdoor-storage properties near ports and is looking to buy more.

Companies get creative

Demand for space to store shipping containers have gotten so great that some vacant land rent prices are rivaling that of actual buildings, leading companies to find new ways to create additional space.

For example, Alterra is thinking of taking down a building near the Savannah port that a building materials company uses, following inquiries from businesses that need land to stack containers, according to Pfeiffer.

Meanwhile, container storage company Chunker recently announced it has agreements in place to use a vacant Sears department stores and their parking lots near California ports for container unloading, Chief Executive Brad Wright said. Spencer also noted that pop-up storage facilities are likely to become a permanent fixture as shipping rates steadily outpace the amount of available land.

“That’s just taking the edge off the terminal now,” Spencer said. “What if I grow 5% next year? I have to find room for that.”

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