As output boosted the US economy in July, volume at The Port of Los Angeles reached its sixth all-time high in seven months, raising concerns about the area’s infrastructure, warehousing demand, and rate structures.
A total of 935,345 Twenty-Foot Equivalent Units (TEUs) were processed in July, breaking the previous record from 2019 by 2.5%.
At a news conference on Wednesday, Port of Los Angeles Executive Director Gene Seroka stated, “Remarkably, we continue to move record amounts of cargo while working down the backlog of ships by almost 90%, a remarkable accomplishment by all of our partners.
Observing that ships are now waiting for space at numerous other ports across the US, Seroka claimed that the supply chain environment in Southern California has improved.
Regarding the biggest port in the world, Seroka remarked, “Our terminals have capacity. For cargo owners looking to re-chart their course, come to Los Angeles. We’re ready to help.”
“We are also seeing many third-party logistics (3PLs) and warehouse users over-order their supply, as it has been hard to get goods from overseas since the pandemic started.
“The record volume has caused rental rates for industrial to rise dramatically. There is not enough warehousing supply to meet the influx of containers and product flooding the Southern California industrial market. With a sub 1% vacancy rate and a scarcity of industrial land, tenants are having a difficult time securing the space needed to store these goods.”
“We predict that tenants will be forced to be searching for warehousing in more peripheral markets where there is more supply of industrial land.”
Highest Rent Gains in Boston, New Jersey, and the Inland Empire
Supply-chain issues, according to Doug Ressler of Yardi CommercialEdge and GlobeSt.com, are making it more important than ever to be strategically situated and pay a premium for space in port areas, which have had the biggest increases in in-place rents in the past year.
According to Ressler, the areas with the highest rent increases are the Inland Empire (8.7%), Boston (8%), New Jersey (7.8%), Los Angeles (7%) and Orange County (6.8%). Additionally, port markets have the lowest vacancy rates. The Inland Empire is at 0.8%, Los Angeles is at 1.9%, and Orange County is at 3.1% in Southern California, which has the narrowest region.
According to Ressler, “The United States is a consumption-driven economy, and most goods come into the country from elsewhere, Estimates peg transportation as accounting for at least half of companies’ supply-chain costs. Although energy prices have fallen of late, those costs are still elevated compared to historical averages.
“Recent supply-chain stresses have illuminated exactly how dependent the U.S. is on other countries for both raw materials and finished products. As a result, firms are now exploring reshoring and nearshoring of manufacturing, which would reshape supply chains but also lead to new challenges.”