New warehouse space needed at Port of Baltimore

The submarket surrounding the Port of Baltimore could use an influx of new warehouse and distribution space.

Demand for spaces near East Coast ports, such as Baltimore, is expected to increase due to a surge in shipping from the expanded Panama Canal, which is expected to open early in 2016. Baltimore is anticipated to benefit in large part because Ports America Chesapeake, operator of the Dundalk and Seagrit Marine Terminals, has invested $105 million in improvements, such as a new 50-foot berth and four post-Panamax cranes at the Seagirt Marine Terminal.

According to Jones Lang LaSalle‘s 2015 Seaport Outlook, Baltimore had one of the largest increases in TEUs, a metric used to measure a cargo ship’s capacity, for an East Coast port, with a 25.1 percent increase between 2007 and 2014. Baltimore was listed in the report as a rising market, and it outscored ports such as Houston, Oakland and Miami in the ratings. Earlier this year, CBRE’s North American Ports Logistics Annual Report ranked Baltimore as No. 11 in its rankings of the nation’s top 15 ports based on criteria such as the strength of the area’s industrial commercial real estate market.

But Baltimore is still lagging in available warehouse and distribution spaces that are needed near the port. Much of what is available could support firms looking for places to store commodities, but there’s currently not much in the way for top distribution firms seeking the latest high-tech facilities. Currently the occupancy rate in the port-market is 89.6 percent driven in large part by Amazon absorbing 1.4 million square feet of space built by Duke Realty.

“There’s a discernible dearth of good quality space [that is] needed at the port,” JLL Managing Director Mark Levy said.

There are several large projects in the pipeline in response to demand for newer warehouse and distribution space.

Chesapeake Real Estate Group LLC and its partner USAA Real Estate Co. recently purchased the former Sun Products Corp. property in East Baltimore. Plans for the 47-acre site include demolishing an existing manufacturing building and replacing it with two new 500,000 square feet structures. The company is also repositioning an existing 500,000-saquare-foot distribution building with new lighting, heat and roof.

Arguably the most ambitious project in the Baltimore area is the renovation of East Baltimore County‘s Sparrows Point into a multimodal hub near the port. The redevelopment — JLL is the project’s exclusive broker — could be built out to handle 10 million square feet of port and maritime use, manufacturing, warehousing, logistics and some retail.

Despite the expected surge in demand and developers responding with new projects, there are challenges to growth. A major issue holding back the port is CSX’s Howard Street Tunnel’s inability to handle double-stack containers.

Last year, community opposition killed plans for a $90 million multimodal facility in Morrell Park that would’ve allowed double-stack containers to be moved from the port. Efforts to address the inability to handle those containers are now focused on adding a freight component to the 140-year-old B&P Tunnel, according to JLL’s seaport report.

Jim Lighthizer, founder and owners of Chesapeake Real Estate Group, said the market in and around the port was performing better than other submarkets in the Baltimore region, but he wasn’t thrilled with its current performance.

“I still think activity is average,” Lighthizer said.