World’s Largest Warehouse Owner Scouting Sites Along ‘Blue Highways’

Miles of prime waterfront real estate that supported the early industrial economies of cities like New York fell to the wayside after cars, trucks and highways replaced historic shipping routes. 

Some of that land has been repurposed for apartments and parks in recent decades, but now logistics players and city officials are dredging up the waterfront’s industrial heritage as a way to relieve congestion and pollution in the Big Apple. It could serve as a model for other American cities with similar struggles.

The Blue Highways initiative, launched by Mayor Eric Adams early last year, is an effort to shift some of the freight entering and moving around the city from trucks to boats. While the program is in its infancy, industrial real estate giant Prologis is already jumping on board.

Prologis paid $122M for a 10-acre property in Greenpoint last year to support the effort, and it is looking for more sites as it considers the best ways to get its clients involved.

“We think this is the moment to try to figure this out,” Prologis Senior Vice President Jeremiah Kane said. The REIT is the world's largest industrial owner, with $215B in assets under management. 

“If it works I’m sure tons of people will try to jump in,” he added. “To make this meaningful and important, it has to be done at scale.”

Conversations about short-sea shipping as a solution to truck traffic have been underway for decades but gathered more steam over the past two years, New York City Economic Development Corp. CEO Andrew Kimball said.

Along with the launch of the Blue Highways initiative, the city in February 2024 issued a request for proposals for six properties that could serve as waterfront shipping hubs for e-commerce deliveries. 

The pandemic turbocharged an already growing e-commerce sector. Now, Kimball said 80% of New Yorkers are getting at least one package delivered every week. A large share of those come in via the city’s aging highway system, which is why EDC is projecting a 45% increase in truck traffic through 2045 with additional traffic, smog and carbon emissions to boot.

These congestion issues aren’t unique to New York City. 

The city last year was tied with Chicago for the nation's most-congested city, with the average driver losing 102 hours a year due to traffic, according to U.S. News and World Report. They were followed by Los Angeles with 88 hours, Boston with 79, Philadelphia with 77 and Miami with 74. 

New York is ahead of the curve with shifting cargo from trucks to boats. Kane said its density and extensive network of inland waterways, combined with the economic drag of congestion, makes the move particularly financially sensible.

But KSS Architects partner Scot Murdoch, who is working with players like Prologis and UPS on their Blue Highways plans, said it could “definitely be a model” for other cities with congestion issues. 

He pointed to Philadelphia, which also has a dense residential downtown and a navigable inland waterway in the Schuylkill River. A wholesale produce market sits along the waterway in Southwest Philly, and Murdoch said the idea of shipping food from there to other parts of the region could be “quite interesting.”

Philly and New York are also both connected by water to port facilities in New Jersey.

While the drive between a Weehawken pier overlooking Manhattan and the Hudson Yards ferry terminal could take about 15 minutes depending on traffic, EDC reported that the same boat trip would take just seven.

“The geographic distances are small, but the time distances can be large,” Kane said. “That’s sort of the secret to make this work.”

Boats also allow economies of scale that can save money in some circumstances.

This is particularly true with the transit of bulky construction materials, where one barge can replace between 40 to 80 truck trips, according to an EDC report.

Prologis had the Blue Highways Initiative in mind last year when it bought the 10-acre Greenpoint property along Newtown Creek from ExxonMobil, Kane said.

The industrial giant is looking for more properties it could buy along New York’s waterfront to bolster the city’s logistics network. 

“By their nature, these waterfront sites are often very close to the ultimate destination,” Kane said. “You want to drive those final nodes as close as possible to the end user.”

Kane spoke to Bisnow after Prologis Senior Vice President Read Mortimer said at an event the Blue Highways initiative is an opportunity the REIT wants to “try and capture.”

“Because of our scale we can marry some of the sites on either side of these waterways,” Mortimer said at the Nov. 6 Bisnow event in Pennsauken Township, New Jersey. 

City-owned infrastructure and public-private partnerships will be key to getting goods from Prologis warehouses in New Jersey across the Hudson River by boat instead of truck.

While New York’s return to its maritime roots will come with a hefty price tag, Paradise Express Ferry CEO Garry Johnson said it is “absolutely cheaper” than upgrading the city’s road network.

Officials in September committed to spending $200M on updates to the Brooklyn Marine Terminal in Red Hook, where containers will be unloaded onto barges, Kimball said. This project, an element of the Blue Highways Initiative, is part of a broader $3.5B mixed-use development envisioned for up to 6,000 apartments.

The city also earmarked $28M in June to build a new marine terminal at Hunts Point in the Bronx. 

Food deliveries are another primary focus for the Blue Highways Initiative, and the upcoming facility’s location near three major food co-ops will help bring that to fruition.

But these major port facilities are only part of the equation.

“The key to maritime logistics is you have to have the infrastructure at both ends to be able to accommodate this,” Johnson said.

EDC has identified dozens of small sites around the city that could be used to offload goods onto land for last-mile delivery. 

Murdoch envisions these as low-profile roll-on/roll-off sites that wouldn’t have a big impact on adjacent uses when deliveries aren’t underway. He and Johnson envision fleets of preloaded e-bikes, quads and other small vehicles riding directly off boats to their final destinations.

Kane is more focused on loading standard trucks onto boats. He believes this would minimize risk for customers and reduce changes to the supply chain.

While swaths of New York City’s industrial waterfront were left abandoned in the second half of the 20th century, this century has brought new commercial development. Former warehouse and factory sites have been repurposed as high-end apartments and scenic parks in waterfront neighborhoods like Williamsburg and Long Island City.

New York’s 520 miles of waterfront provide a range of opportunities, but this prime real estate is still a finite resource. The build-out of waterfront industrial facilities to support short-sea shipping could impact the potential for new parks and residential development in certain areas. 

“If you’re going to do this correctly, you’re going to have to provide roadway access to the waterfront,” Johnson said. 

“That may impact the placement of buildings … It will have some impact for the development potential on the lots that are adjacent to that boardwalk area.”

While the Blue Highways Initiative is still in its infancy, Johnson and Murdoch expect that once its presence on the waterfront becomes more pronounced, it will generate pushback from multifamily development players.

But they said they believe apartments and parks can coexist with these landing sites if they are designed in a complementary manner.

“You will always have resistance from real estate developers for obvious reasons,” Johnson said, adding that the industrial and residential sectors aren't mutually exclusive. 

“It’s not one or the other. We have to think about this in terms of both,” Murdoch said. “People need the goods and need access to the water.”