Over the last few weeks, I have done a lot of research for our new white paper European seaports – the growing logistics opportunity. It’s a topic I have been familiar with since writing our first European seaports report European seaports: future logistics hotspots back in 2008. My first impression was, five years on, trends driving change in the ports landscape are broadly unchanged. In particular, continued growth in global trade and increasing ship sizes remain the driving forces – although there are obviously many more dynamics that impact ports on a macro level. However, some of these trends have started to intensify over recent years and the hierarchy of European container seaports has started to shift.
Moreover, as a growing number of ports – both large and small – are competing for the same hinterland, there is a noticeable increasing competition between ports to offer shipping lines and cargo owners access to the best handling and warehousing services along with efficient access to markets through multi-modal hinterland connections.
There are a number of ambitious and aggressive port expansion plans underway in Europe today. Europe’s three largest ports – Rotterdam, Hamburg and Antwerp – are each working to significantly increase their capacity. Many more are upgrading and extending the facilities they offer to accommodate larger container ships along with increasing port container throughput. New port developments are also coming online and adding to the competitive mix– including the largest harbour project in Germany, the JadeWeserPort, and the London Gateway project, the first phase of which is due to open at the end of 2013. The factors that will increasingly determine the success of these and other European seaports comprise a combination of nautical accessibility and port and hinterland infrastructure.
It has been the case until recently that the ease of transporting standardised containers – and the low transport costs of the past – meant less emphasis was placed on port-side logistics. However, a number of supply chain considerations are leading cargo owners to re-think there strategy. A trend that we have predicted already in our first report although the catchword ‘port-centric logistics’ had yet to become widely known.
Benefits of locating a distribution centre at or close to a port include lower transport costs, increased certainty for delivery times and faster speed to market, along with lower environmental impacts. The net impact of all these drivers is likely to be considerably higher demand for warehousing facilities close to ports.
And that could be a major opportunity for real estate developers and investors. Our analysis suggests that demand for portside warehousing – based on the growth in container volumes – could reach between 20 to 30 million sq m by 2030. This would reflect a substantial 40% to 60% increase on today’s existing warehouse space within the regions of those ports that had an annual throughput of over 500,000 TEU (twenty food equivalent unit) in 2012.
However, not all ports will be suitable candidates. Some, for example those in urban settings, are in areas where land to expand is limited. Investors and developers with an interest in the possibilities afforded by seaports will therefore need to review their options carefully. But the potential rewards for those that choose wisely could be significant.