The Expanded Suez Canal: New Opportunities for Global Shipping Ports

PLAY OF THE LAND

When Egypt unveiled its New Suez Canal, a broader and deeper channel that can handle upwards of 97 ships a day, it did so with the belief that its “gift to the world” would bolster international trade and revive the Egyptian economy.

Now, one year after its official unveiling, the new canal is off to a promising start.

Revenues from the New Suez Canal reached US$3.2 billion between January 1 and August 6, 2016, a 4 percent increase from the same period in 2015, the Suez Canal Authority announced during a one-year anniversary celebration.

According to the Suez Canal Authority, Egypt decided to create a new canal parallel to the existing one in order to double the length of the waterway to facilitate traffic in two directions and lessen waiting time.

“This will certainly reduce the time needed for the trip from one end of the canal to the other, and will increase the numerical capacity of the waterway, in anticipation of the expected growth in world trade,” the authority says on its website.

Increased Capacity

Prior to the expansion, the canal’s capacity was 49 vessels per day. By 2023, it will be able to handle up to 97 ships. Considering many ships can shave up to 10 days off their voyage by using the Suez Canal instead of sailing around the southern tip of Africa, the expanded capacity could potentially double the amount of vessels passing through the Suez Canal each day.

Not only can the new canal transport more vessels, it can also allow passage for larger megaships. As container ships continue to grow—the average ship being built today is around three times larger than a decade ago—canals and ports around the world are feeling the pressure to figure out ways to serve the ever-growing vessels.

For the Suez Canal, that meant spending 12 months excavating over 9 billion cubic feet of sediment to deepen the existing canal and create a new parallel, 22-mile route.

New Opportunities for Global Shipping Ports

With the expanded canal comes increased traffic, and according to a recently released CBRE report by Machiel Wolters, CBRE’s head of industrial and logistics research in EMEA, global shipping hubs are taking advantage.

“Anticipating growth, many ports in the Mediterranean have decided to upgrade and increase their container terminal capacity, and a striking number of new terminals are under construction or have recently been opened,” Wolters says in the report.

Though Mediterranean ports are looking forward to increased volume in the coming years thanks to the Suez Canal expansion, many ports have already logged significant growth since 2009—led by Piraeus, Greece, with a nearly 424 percent increase in volume; Algeciras, Spain, at 54.5 percent; Genova, Italy, at nearly 54 percent; and La Spezia, Italy, at just over 50 percent.

Typical gateway ports are preferably well-connected to large industrial and population centers.

For the purposes of the CBRE report, ports are broken down into three types: gateway ports, mixed ports and transshipment hubs. Gateway ports are primarily used to distribute goods inland, while transshipment hubs are predominately used as a place to exchange cargo between transport services. Mixed ports act as both.

Since most cargo that passes through transshipment hubs doesn’t enter the local markets, gateway ports and mixed ports are generally most relevant to the industrial real estate market.

Wolters explains what makes a gateway port primed for growth: “Typical gateway ports are points of entry or exit for continental markets, and they are preferably well-connected to large industrial and population centers. Mediterranean examples include Marseille in France and the northern Italian ports, which can be seen as a cluster of gateways.”

The ports most primed for real estate growth directly serve a large market and are also well located for transshipment. In Spain, that means Barcelona and Valencia. In Egypt, it’s Damietta and Alexandria.

Expanded Ports, Expanded Distribution

While northern Italy is already an established logistics hub—with Milan, Bologna and Venice all closely clustered together—new investments and construction at Vado Ligure (near Genoa) will serve an even wider distribution base, including the Alpine populations, southern Germany and central Europe.

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Less well-established markets, such as Turkey and Egypt, are also seeing increased port investments. In fact, the second leg of the Suez Canal expansion, the Suez Canal Area Development Project, seeks to further develop three major canal cities that are traditionally used for transshipment—Suez, Ismaïlia and Port Said—by building new shops, housing developments, commercial offices and more. Similarly, Turkey is benefitting from a large number of port investment programs, especially along the Sea of Marmara and around Izmir.

As international shipping continues to increase, and shipping vessels continue to grow larger, Mediterranean ports are looking to boost their handling capacity by investing in current ports and creating new terminals. And as ports continue to develop, industrial real estate in the surrounding areas is expected to thrive.

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