Port of NY-NJ Mid-Year 2023: A Comprehensive Snapshot of Performance and Trends

The Port of New York and New Jersey (PNYNJ) has long held its position as the East Coast’s busiest port, acting as a vital gateway for international trade. Boasting six container terminals and an extensive network of cargo rail lines, the PNYNJ caters to a highly affluent and densely populated consumer market. Remarkably, the port possesses the largest population within a 250-mile radius of any port in North America, encompassing a staggering 61 million individuals who contribute to approximately one-third of the nation’s GDP. Furthermore, the port’s rail connections extend not only to the Midwest and Canada but also to the bustling Greater Boston area.

 

The container volume at the Port of New York and New Jersey has shown a promising recovery, surpassing the 600,000 TEU (twenty-foot equivalent unit) mark for the third consecutive month. This rebound comes after a brief dip below this threshold in February and March. Although the total mid-year volume stands at 1.9 million TEUs, representing a 24.5% year-over-year decline, it marks an 11.0% increase compared to the first half of 2020.

The decline in volume can be attributed to several factors, including a cooling economy and persistent inflation, which have dampened the demand for goods. However, there are positive indications that the situation is stabilizing. The consistently strong U.S. employment report and the stabilization of freight and energy costs suggest that levels have normalized following the record increases witnessed in 2021 and 2022.

 

In the upcoming months, there is an expectation of a surge in import cargo volumes as retailers gear up for the winter holiday season. This seasonal uptick reflects the industry’s preparation to meet the heightened consumer demand during this festive period.

Furthermore, encouraging news has emerged regarding labor negotiations for both the West Coast Ports and United Parcel Service (UPS). Tentative agreements have been reached, effectively averting the potential disruptions to the supply chain in the latter half of the year. This development brings a sense of stability and reassurance to the industry, ensuring smoother operations and minimizing the risk of delays or bottlenecks in the transportation of goods.

 

Situated in close proximity to the Port of New York and New Jersey, the Greater Port Region warehouse market serves as a prime location within one of the most concentrated and affluent consumer markets worldwide. This particular submarket in New Jersey has witnessed a notable surge in demand for warehouse space. This increased demand can be attributed to the growth in cargo volumes and the rise of larger ships, driven by the heightened consumer demand in the region.

The Greater Port Region submarket offers tenants a highly advantageous position, benefiting from its strategic location near the New Jersey ports and the busiest thoroughfares throughout the state. This proximity ensures efficient and convenient transportation of goods, catering to the evolving needs of businesses operating in the area.

 

The vacancy rate in the Port Region has experienced a notable increase, rising by 360 basis points compared to the previous year, reaching 4.7%. This rise can be attributed to the introduction of new properties into the market. Additionally, there has been a negative net absorption in the first half of 2023, with year-to-date net absorption totaling negative 253,554 square feet (sf). Leasing activity in the Port Region has returned to pre-pandemic levels, following a surge in demand observed in 2021. Mid-year leasing activity in 2023 stands at 749,248 sf, representing a 34.0% decrease compared to the same period last year.

The demand from tenants and the increase in asking rents in the Port Region are primarily influenced by the container activity at the Port of New York and New Jersey (PNYNJ). As a result, there has been a significant year-over-year surge in asking rents, reaching a record high of $21.10 per square foot, reflecting a remarkable 68.2% increase. Both asking and taking rents have experienced rapid growth over the past year, particularly in centrally located new developments and higher-quality spaces within the region.