Port gateway real estate offers substantial investment opportunities, fueled by expanding trade routes, increasing demand for industrial space, and the ongoing trend of nearshoring. By understanding industry-specific deal structures, optimizing underutilized land, and engaging in flexible agreements, investors can unlock significant returns and long-term growth potential. Such deal terms can be successfully applied to a wide range of use cases, most importantly for private properties which are dependent on or impacted by a port gateway.

Challenges in Port Gateway Real Estate

Navigating port-related real estate investments is challenging due to issues like accurate site valuations, financing through public-private partnerships, and adapting to the competitive maritime industry. Specialized knowledge is crucial to avoid inefficiencies.

Recent supply chain disruptions, driven by global trade fluctuations, the COVID-19 pandemic, Suez Canal obstruction, labor strikes, and climate-related events, have reshaped pricing, supply, demand, and customer expectations. These disruptions have led to business and profit losses for users constrained by outdated or inflexible real estate deals. The traditional supply chain model is especially vulnerable to such issues.

Key Considerations for Stakeholders

These shifts demand that stakeholders rethink port-related real estate investments, whether negotiating directly with a port authority or strategizing as an owner or user of private property reliant on or affected by a port gateway.

Key considerations include:

• Site Valuations: Accurate valuations for properties with limited comparable sales data and unique income streams is critical. For example, property within or dependent upon a port gateway may have access to key transportation routes but lacks similar sales data in the region. Crafting specialized valuation methods that consider factors like proximity to deep-water access, intermodal transportation options, and supply chain advantages can ensure that all the potential value drivers are captured. In our experience, failing to account for these variables often leads to missed opportunities or undervaluation, leaving profits on the table.
• Public-Private Partnerships Financing: Optimized funding models require precise structuring to align the needs of public sector sponsors, private sector users, and state and federal funding regulations. For instance, in negotiating a deal for a property redevelopment that is within or dependent upon a port gateway, we’ve secured creative financing terms by leveraging multiple revenue streams—such as dockage fees, crane rental income, and storage fees—as collateral for public loans. This multi-faceted approach maximizes the investor’s flexibility while ensuring that public sector partners receive guaranteed returns, even during downturns.
• Competitive Maritime Industry: Port gateway stakeholders must adapt to shifting global trade patterns and infrastructure upgrades to stay competitive. Negotiating deal terms requires balancing stability and flexibility, ensuring that both public and private interests are safeguarded. For instance, we’ve successfully negotiated agreements where port authorities are guaranteed minimum revenue thresholds during periods of market downturns, with performance bonuses awarded to private operators during profitable years, creating a mutually beneficial partnership. Such deal terms can be successfully applied to private properties as well. Without such nuanced deal structures, parties often face unbalanced risks that can lead to disputes or missed opportunities.

Unlocking Real Estate Growth and Investment Opportunities

Port gateway real estate, whether for users or owners of port-owned property or users and owners of private property which is dependent on or impacted by a port gateway, offers substantial investment potential.

To capitalize on these opportunities, investors need a team that understands the nuances of port real estate, including:

• Deal Terms for Changing Markets: Flexible agreements allow quick adjustments to market fluctuations, unlike traditional, rigid leasing models. For example, in a recent deal, we negotiated a lease term that included short-term extensions and the option for early termination without significant penalties, allowing the tenant to adjust to market conditions while still committing to long-term infrastructure investments. This flexibility was critical in securing the deal, as both parties needed assurance of adaptability in an unpredictable market.
• Maximizing Undeveloped Land: Many port properties, whether publicly owned or privately owned and impacted by the general direction and success of a nearby port, remain underutilized until demand surges and when it does, decisions are rushed and options are limited, negating wise long-term planning. For instance, we helped a client develop a port property that was underutilized and negotiated deal terms that included reduced lease rates in the early years, with tenant-driven incentives that led to substantial capital improvements, boosting the property’s value. These improvements positioned the land for high-demand use as trade routes expanded, creating a win-win scenario for both landlord and tenant. Such deal terms can be successfully applied to private properties as well. This approach not only increases potential rents but also accelerates the development of multi-purpose infrastructure, ensuring long-term viability of the broader portfolio as well.
• Specialized Guidance: Port gateway transactions require expertise beyond traditional real estate. Experienced advisors streamline negotiations and ensure alignment with business objectives, handling market analysis, regulatory compliance, and grant strategies. In a recent deal, we worked closely with state and federal agencies to secure grants for port infrastructure, ensuring the project met both public and private sector requirements. In-depth understanding of federal and state regulations, coupled with strategic deal structuring, helped secure favorable financing terms that might have otherwise been unavailable.

The Future of Real Estate within or Impacted by a Port Gateway

As global trade evolves, port gateway real estate remains valuable for investors and logistics operators, and strategic planning and expert guidance are key to unlocking its full potential. Private entities may lack understanding of public regulations, while port authorities may struggle with market-driven flexibility. Early involvement of specialized real estate professionals ensures seamless collaboration, leading to stronger partnerships and successful developments. Even for private owners whose property use is impacted by the general direction of a nearby port, being educated on port gateway dealmaking promotes informed decisions which lead to user success.

For more insights, reach out to our team at Colliers, and explore the latest Colliers industrial research here.

Be sure to explore the previous installments of this series:
Part 1 – Port Gateways: Strategic Hubs for Economic and Real Estate Growth
Part 2 – Industrialized vs. Consumer-Driven Port Gateways: Navigating Key Differences