Key Bridge Collapse To Drag Down Baltimore-Area Economy

The collapse of Baltimore's Key Bridge is expected to cause substantial disruptions to the region's economy and its industrial real estate sector. 

The degree to which the catastrophe damages the local economy depends largely on how long the collapse hinders operations at the port, one of the busiest on the East Coast. Ships still can't enter or leave the port due to debris blocking the shipping channel in the Patapsco River.  

“In the short term, much of the attention will be paid to the interference with operations at the port,” economist Anirban Basu, CEO of Sage Policy Group, told Bisnow. “That is arguably our No. 1 economic development driver. It's the No. 1 economic engine.”

The port generates nearly $3.3B in total personal income and supports more than 15,000 jobs directly and 139,000 jobs connected to work at the port, according to the Maryland government. Daraius Irani of Towson University's Regional Economic Studies Institute estimated to The Baltimore Sun that the port closure could cost as much as $15M per day in lost economic activity. 

“Until the shipping channel gets opened, there’s not going to be any ship traffic, there’s not going to be any ships, there’s not going to be any work for the people,” International Longshoreman Association Local 333 President Scott Cowan told The Baltimore Sun. 

Debris from the bridge continues to block the 50-foot channel cargo ships use to enter and exit the Port of Baltimore. The port is one of four in the nation with a shipping channel deep enough for use by massive Panamax container ships. 

The port set new volume records last year and led the nation for the amount of cargo transported across several categories: automobiles, light trucks, farm equipment, construction machinery, sugar and gypsum, according to a February release from Gov. Wes Moore. 

U.S. Sens. Ben Cardin and Chris Van Hollen of Maryland said at a press briefing Wednesday that reopening the port is their top priority to mitigate the economic fallout. Van Hollen said the Army Corps. of Engineers would pay for clearing debris to reopen the channel.

“The Port of Baltimore is that important,” Van Hollen said. 

President Joe Biden also discussed the importance of Baltimore's port on Tuesday, vowing to use federal resources to help clear the channel and calling on Congress to fully fund the reconstruction of the bridge. 

State officials said Wednesday they don't have a timeline for when the cleanup would be completed. Experts say it is too soon to know how long it will take to clear the debris and reopen the port, with some arguing it could take weeks and others estimating months. 

“I’d be shocked if it’s weeks,” Benjamin Schafer, professor of civil and systems engineering at Johns Hopkins University, told The Washington Post. “But I don’t think it’d take even a year. There is, certainly, that technology for moving the steel out as quickly as possible.”

In addition to the port's closure, the loss of the Key Bridge itself, which transported more than 30,000 vehicles per day, serves as a significant setback to the local and national economy. The bridge's collapse essentially cuts off the outer loop of Interstate 695, disrupting the ability to move cargo from the port via truck to nearby rail lines. 

The blue-collar segment of the local economy is likely to feel the economic impact of the bridge collapse most acutely, Basu said. That is due to the concentration of Baltimore's blue-collar workers who live and work in areas surrounding the Key Bridge.

“What's interesting is it's really a [big] impact on blue-collar Baltimore. ... If you look at the Baltimore region, much of blue-collar Baltimore is concentrated around the Port of Baltimore,” Basu said. 

The collapse also presents a unique challenge to Baltimore industrial real estate, which has been the top-performing commercial real estate sector in the region over the last decade. 

The rise of e-commerce centers has driven much of that sector's regional growth, and distribution hubs like the massive Tradepoint Atlantic industrial complex at the foot of what was the northeast span of the Key Bridge still largely depend on trucks to move their products. 

Tradepoint Atlantic contains the only shipping point that lies outside of the Key Bridge, meaning it can still accept new cargo ships before the cleanup is complete, The Baltimore Banner reported Wednesday. 

“As part of the Port of Baltimore, we are committed to helping our state and local partners and the entire port community recover and rebuild from this tragedy,” Tradepoint Atlantic said in an emailed statement Tuesday. 

The Baltimore-area industrial market saw slowing demand last year, in line with national trends. According to Lee & Associates’ latest market report, the region recorded negative net absorption of 260K SF in the fourth quarter, and its vacancy rate increased to more than 8%, the highest rate in over five years.  

“As companies reevaluate their supply chains the amount of vacant sublet space has increased, contributing to the negative absorption and increased vacancy rate,” the report says. 

Chesapeake Real Estate Group founder Jim Lighthizer, a top industrial developer in the region, said the bridge disaster provides challenges and opportunities for CRE, adding that they fall into three categories: short, medium and long term. 

He said the most immediate challenges involve reopening the channel and getting goods moving in and out of the port. Companies and state officials must find a way to move cargo and hazardous materials that can't ship through the Baltimore Harbor tunnel and convince companies to continue operating in the metro area. 

The most pressing medium-term challenge involves designing, permitting and building a new bridge. That process took five years before the Key Bridge opened in 1977. At the same time, planners must find a way to accommodate existing businesses at the port while providing for growth. 

In the long term, Baltimore has to work to move itself to the top of the list of places where companies that need multimodal transportation access want to relocate, Lighthizer said.

But projects like ongoing improvements to rail tunnels, which allow double-stack cargo to ship by rail from the area, and new federal, state and local infrastructure investment stemming from the bridge collapse present an opportunity to lure new businesses, he said.   

“Companies will have to reimagine their supply chain, move goods and people around,” Lighthizer wrote in an email. “This can lead to best practices. Possibly container cargo and cranes moving to the south side of the harbor. More rail use. More demand on the south side of the tunnel.”