Port of Baltimore Was Booming Before the Key Bridge Collapse
It was the only major U.S. port where container volume increased in 2023
By Chava Gourarie April 5, 2024 9:00 am
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Before Baltimore’s Francis Scott Key Bridge collapsed in late March, the Port of Baltimore was one of the fastest-growing major ports in the country. In fact, it was the only major U.S. port to see its container volume increase in 2023, while nationally port activity settled down and returned to a pre-pandemic baseline.
The Port of Baltimore handled 1.1 million 20-foot equivalent units (TEUs) in 2023, an increase of 4.9 percent over 2022, while container volume declined 12.5 percent nationally, according to a Savills report on the nation’s largest ports. (TEUs are the standard measure for the shipping industry.)
“2022 was the busiest year ever for U.S. ports, and then 2023 saw across-the-board declines in container volume,” said Mark Russo, an industrial researcher at Savills and co-author of the report. “We saw a normalization of trade last year after what was the excess activity coming out of the pandemic.”
The Port of Baltimore was the exception, largely due to the capital investments made at the port to support growing demand, said Mike Royce of Savills’ industrial services team, who has worked in the region for years.
While the port doesn’t compare in size to the larger ports in the Northeast or on the West Coast, which handle 15 times the cargo that comes through Baltimore, it stands out as being the country’s top destination for vehicle imports, and for its proximity to the Midwest, Royce said.
The Maryland Port Authority, which oversees the port, spent $630 million in upgrades to the Seagirt Marine Terminal, which handles the majority of the container cargo entering the port, and the Howard Street Tunnel, which handles truck and train traffic going to and from the port.
A large chunk of the funding went into raising the tunnel height by 21 feet to allow for double-stacked trains, a project that is expected to be finished by 2025. In addition, in 2023, the federal government awarded the Port of Baltimore $47 million for a new roll-on/roll-off pad, a new crane pad and structures, as well as an offshore wind project.
The federal funding is part of the $21 billion designated for port improvements in the Biden administration’s Infrastructure Act in an effort to bring American ports up to par with their global counterparts.
But not all ports are investing equally. In fact, of the 12 ports listed in the report, the Port of Miami stood out for its lack of capital investment, said Russo. “What’s most notable about Port Miami is that they have not been investing as much in their cargo operations there,” he said, noting its last major infrastructure project was completed in 2015.
Miami handles a similar amount of volume as the Port of Baltimore, averaging just over 1 million TEUs per year since 2019, per the Savills report. In fact, in 2023, the two ports switched places, with Baltimore ranking 11th and Miami 12th, after volume at the South Florida port declined 8.4 percent annually — which was still better than the national average.
Of course, Miami is also the world’s busiest cruise port, so that remains a large part of its focus. Meanwhile, the nearby Port Everglades is catching up, having exceeded 1 million TEUs for the first time in 2023, according to statistics released by the port. “I wouldn’t be surprised if it overtook Miami in the next couple of years, given the greater focus and investment on the cargo portion,” said Russo.
On the real estate side, the Baltimore region has 207 million square feet of industrial space, with 1.5 million square feet in the pipeline. The market registered an 8.3 percent vacancy rate at year-end 2023, making it one of the more tenant-friendly markets in the fairly tight industrial space. Only Savannah, Ga., had a higher vacancy rate — but Savannah is also a market in transition, with a rapidly growing warehouse sector netting some of the highest rent increases.
“Ten years ago, 15 years ago, the Port of Savannah was really all about sending the containers straight through to Atlanta by rail or truck,” said Russo. “But, in the last decade, the warehousing market has really developed and grew around it, and now there’s more than 100 million square feet of inventory.”
Savannah now has 120 million square feet of inventory, and another 12.5 million square feet under construction, more than 10 percent of the existing market. And, while asking rents were the lowest in the markets surveyed, at $6.90 per square foot, they had increased the most: 28.2 percent over the previous year.
While the Key Bridge collapse will certainly affect the Port of Baltimore in the short term, it’s unlikely to dislocate the market too much once the waterway is reopened, said Royce. Most companies will simply detour their inland routes to account for the missing bridge and adjust for the time increase, but relocating to a different port would only make matters worse. That’s both because of warehousing space and transportation costs.
“The impact to the consumer will be simply on timeline,” Royce said. “But I don’t see them changing. There’s a lot of space occupiers up and around the Port of Baltimore; it’s very difficult to change your location.”
One of the main takeaways for companies will be a similar one learned over the last few years of constant stresses to the supply chain.
“Combined, we have a drought in the Panama Canal, attacks happening in the Red Sea that that are delaying activity at Suez Canal; we have on-and-off labor disputes. These things all combined are great stresses on supply chains, and causing companies to seek to diversify, so they’re not overly reliant on a single piece of infrastructure that could be vulnerable,” said Russo. “We really don’t know where the next event is going to happen.”
Chava Gourarie can be reached at cgoruarie@commercialobserver.com.
