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2022 Global Seaport Review: Los Angeles/Long Beach, California

Navigating evolving global seaport regions and their impact on industrial real estate

December 13, 2022 4 Minute Read

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Thirty percent of U.S. imports travel through the San Pedro Port Complex, making it a critical part of Los Angeles’ logistics infrastructure. This is creating demand for industrial space in and around the port markets, driving vacancy to all-time lows and pushing prices to record highs. While leasing activity may have decreased over the past quarter, it’s more related to a lack of transactable space than the current economic moment.
Lew HornePresident, Advisory Services Greater Los Angeles, Orange County & Inland Empire, CBRE

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Overview

The Port of Los Angeles and Port of Long Beach make up the San Pedro Bay Port Complex. The Port of Los Angeles is the largest in North America, spanning 7,500 acres and 43 miles of waterfront. The Port of Long Beach handles more than 8.1 million TEUs each year with cargo valued at $200 billion. The San Pedro Bay Port Complex is ranked ninth worldwide and accounts for 31% of U.S. container movements in seaports. The ports provide approximately 190,000 jobs.

The ports faced many obstacles over the past two years, including the pandemic, labor issues and changes in the rail and trucking industries. Earlier this year, truck drivers paused operations to protest California’s AB5 law, which forces trucking companies to reclassify drivers that previously had an independent contractor status as an employee. A high majority of trucking companies are owner-operated in California, fueling concern that this law impacts their ability to operate without being employed by another company or being part of a union. The new law may adversely affect the movement of goods from some West Coast ports as owners are unable to enter into lease agreements with motor carriers, reducing the number of trucks hauling loads to and from the ports. In September, a tentative deal was struck between the railway companies and union leaders, avoiding a strike which could have led to further supply chain disruptions.

Figure 1: TEU volumes

Source: CBRE Research, Port of Los Angeles, Port of Long Beach, 2022.

Figure 2: Population demographics

Source: macrotrends.net, Los Angeles Metro, 2022.

10.7 M

container units handled in 2021, the Port of Los Angeles' busiest year ever

Port features

The Port of Los Angeles includes a 53-foot main channel water depth, seven container terminals, 270 berths and 85 container cranes. The port is big-ship-ready to transport goods to 14 major U.S. freight hubs. It includes 116 miles of rail, with five on-dock railyards and a classification yard. The Port of Long Beach has a depth of 76 feet, the deepest in the country, and contains 22 shipping terminals, of which six are container terminals, 80 berths and 70 post-Panamax gantry cranes.

Figure 3: Port details

Source: CBRE Research, Port of Los Angeles, Port of Long Beach, 2022.

Trade partners

The Port of Los Angeles’s top trade partners in the last six to eight months include Mainland China, Vietnam, Thailand, South Korea and Taiwan. The top imported goods at the Port of Los Angeles include furniture, auto parts, apparel, plastics and footwear. The top exported good include pet/animal feed, paper/wastepaper, soybeans, fabrics/raw cotton and scrap metal.

The Port of Long Beach’s top trade partners include Mainland China, Vietnam, South Korea, Japan, Hong Kong SAR and Taiwan. Top imports include crude oil, electronics, plastics, furniture and clothing. Top exports include petroleum coke, petroleum bulk, chemicals, wastepaper and foods.

Intermodal transportation

The Port of Los Angeles features on-dock and near-dock rail services, with two-thirds of the goods imported leaving via rail. At the Port of Long Beach, the $34.7 million Pier G/J Double Track Access project was completed in April, adding 8,000 feet of rail trackage and four terminals to increase train capacity. The Port of Long Beach’s Middle Harbor Terminal Redevelopment project will join two of its aging shipping terminals to create what’s billed as the world’s greenest container terminal. The Port of Los Angeles will invest $34.3 million in the Pier 400 Corridor Storage Track Expansion, which extends an existing rail bridge, adds new rail storage tracks and includes other rail modifications.

Image of Los Angeles port

Real estate influence

The ports are two of the busiest in the U.S. and greatly impact the region’s industrial and logistics real estate market. Los Angeles County is the second-largest industrial market in the U.S., with 948 million sq. ft. of space. As of Q2, the market’s 0.6% vacancy rate is the fourth-lowest in the U.S. With limited supply and availability, asking rents continue to climb, reaching a record of $16.20 per sq. ft. per year in Q2. Warehouse leasing is driven by occupiers and users in the third-party logistics, retail and food industries.

The ports also drive demand in many surrounding markets. The Inland Empire is one of the most dynamic industrial markets in the country due to its proximity to the ports and its plethora of Class A industrial facilities. The market had the world’s lowest vacancy rate, at 0.2%, in Q2, and its taking rents have grown 72% during the past 12 months. With record-low vacancy rates near the ports, markets further east are taking advantage of port-related demand, including Central Valley, Phoenix and Las Vegas.

Figure 4: Industrial & logistics market stats

Source: CBRE Research, Q2 2022.

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