The Year in Commercial Real Estate; Houston a Top 5 Food City


Photo of Midtown Park: thranth via Swamplot Flickr Pool


One Comment

  • Re: Forbes Article on Panama Canal Expansion. (First, Forbes is a terrible source of information for anything at all ever, and the quality of their research and writing is terrible.) If you talk to the Port Authority’s economists, they aren’t as rosy. Even the GHP is reserved about the prospects.

    Consider several things:
    1) The size and economics of Post-Panamax vessels are certainly an improvement, but the newest and largest generation of vessels outstrips even those. The biggest vessels still cannot traverse the Canal or any part of the Houston Ship Channel system.

    2) Freight rail companies have done exceedingly well for a number of years now and have made massive investments in track replacement, double-tracked corridors, and in a few cases even re-activating abandoned lines. Certain corridors have been particularly built-up in anticipation of the Canal Expansion, such as between Norfolk, VA and Chicago to serve the Upper Midwest. Meanwhile, capacity utilization should be expected to begin declining as record oil production tapers off. There is going to be capacity to spare, and not just going to the US west coast but also to Mexico’s west coast.

    3) Massive distribution hubs in the Midwest (where freight lines converge from the West, such as at Dallas and Kansas City) are unlikely to change their placement, even if coastal markets could be better served by smaller decentralized distribution centers.

    4) In terms of containerized imports, Houston can plausibly be a solid gateway to Texas, Arkansas, Oklahoma, and Louisiana, and for companies that are big enough (e.g. Wal-Mart or Home Depot) or focused enough (e.g. oilfield equipment), that’s good for Houston…but the cost of freight rail precludes its use within about a 450-mile radius of an origin railhead. Worse still, freight rail traffic is notoriously congested inside the Houston metro area, so timeliness is a problem. Trucking is faster and reduces the cost of drayage. Putting these containers on rails has never been a popular option, and there is plenty of capacity to spare; and yet, anywhere that a freight train might go out of Houston with containers is still going to be better-served from the West Coast or from competing Gulf Coast container ports, many of which have already been upgraded to serve the new vessels.

    6) The fact remains that there are many many many Panamax vessels already in operation and that they will be decommissioned and replaced all at once. For the time being, the bigger vessels, fewer in number, are most likely going to sail to bigger container ports. Unless very many of these start regularly visiting Houston, Houston won’t see many direct benefits.

    THERE WILL BE BENEFITS. I’m not saying otherwise. There will be opportunities. But its not going to be transformative the way we might think. Not quickly. Its much better news for the East Coast and Rust Belt than for Texas Perhaps forty or fifty years from now when many of us are dead, our children mostly having moved away, those people that at that point call themselves Houstonians will be thankful for the changes that this and the next-generation Panama Canal Expansion have wrought.