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Spencer Levy
Some enduring images of American ports in recent years, perhaps the only images that come to mind when I mention ports, are the traffic jams of container ships waiting offshore that we saw when the pandemic snarled global supply chains. On this episode, we pull back the curtain on those recent memories and find out how this vital segment of commercial real estate got back to running full steam ahead.
Gene Seroka
When you get this flood of cargo like we did it with Covid, holy crow, it comes down to gridlock. And what do you do?
Spencer Levy
That's Gene Seroka, Executive Director of the Port of Los Angeles, the largest port in America, handling 10 million shipping containers per year. Moving cargo from ships to rail and trucks for wider distribution. Gene also serves as LA's Chief Logistics Officer, a role born out of his work on PPE distribution during the city's Covid response efforts.
Barbara Melvin
We're starting that resurgence of exports and that, along with a lot of capacity, to bring more goods now, is really our story at this point.
Spencer Levy
And that's Barbara Melvin, CEO of the South Carolina Ports Authority, which annually handles more than one and a half million containers or boxes to use the industry term. Barbara is the first woman to lead a major operating port in the United States. And for a global perspective, we welcome a CBRE leader whose work covers ports around the world.
Doug Norton
We've seen record growth in rents, incredible decline in vacancy, and just incredible demand. And now we're coming back to more normalcy in the market.
Spencer Levy
That's Doug Norton, a co-leader of CBRE’s Ports and Integrated Logistics group who recently celebrated his 40th year at the company. Doug and his team of around 50 brokers cover ports from Antwerp to Shanghai, Tokyo and beyond. Coming up, your ship has come in for a conversation about ports, operational real estate that bridges oceans and connects global supply chains. I'm Spencer Levy, and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take. And this week, we're going to be talking about ports, seaports, and other forms of ports, with some terrific experts in the space. Starting with Barbara Melvin, CEO of the South Carolina Ports Authority. Barbara, welcome to the show.
Barbara Melvin
Thank you for having me.
Spencer Levy
Then we have Gene Seroka, Executive Director of the Port of Los Angeles. Gene, thanks for coming out.
Gene Seroka
Thank you, Spencer. Good to see you.
Spencer Levy
Good to see you. And then we have our own Doug Norton, who leads our practice in the ports arena. Doug, thanks for coming out.
Doug Norton
Glad to be here. Good to see everybody.
Spencer Levy
Great to have you. So I think it's fair to say that the average person didn't really think much about ports until the pandemic. But then it became the topic. It became the topic because of the back ups of ships out at sea, being able to move the goods off the docks into the broader logistics system. So, Barbara, maybe we could start with you. Give us a broader perspective of where we were at the depths of the pandemic and where we are today?
Barbara Melvin
Spencer, during the pandemic, our port was one of the last into congestion and the first out. As an operating port, we have a lot of levers that we can pull here in South Carolina, and we experienced about five months of congestion between 21 and 22. And since then, we've had no additional congestion and what we did as a port, because someone in the supply chain crisis had to be selfless, we threw a bunch of our unexpected one-time revenue from long dwell boxes or storage charges, and we threw that at a couple of things that really made a huge difference for us, and that was buying of chassis. So the availability of equipment made a big difference in our port. We altered our berthing practices, asking our ocean carriers that when they took a box off the ship, so discharged an import, if they put one back on the ship at the same time, an export load or an empty, so it created space on our facility. They got berthing priority, so they would file a manifest that was equal down and out. Then we would push them up in the line. We kept an express berth for our ships that had under a thousand moves and that was constantly running. We worked with our rail partners to keep additional hours open. We worked with our motor carriers. We opened on Saturdays and Sundays. Saturdays has been a regular for us for more than a decade, but Sundays was new during the pandemic and so that access to the box at any time for our importers was important, as well as being able to deliver the export to the facility because you were compounding the problem. Those are just things that we did here and truly now for a very large amount of time, we've seen no congestion, no vessel backups. And really the great news for the United States is we have more exports on our terminals right now than imports. So we're starting that resurgence of exports and that, along with a lot of capacity to bring more goods now, is really our story at this point.
Spencer Levy
Let's go to you now, Gene. Where were we at the depths of the pandemic and where are we today?
Gene Seroka
You know, it was an unbelievable experience because this supply chain awareness that we've all witnessed really started back around 2018 when the previous administration to Washington decided to get tough on China, put tariffs in place. They were met with retaliatory tariffs and a lot of tug and pull geopolitically around trade between the world's two biggest economies. And that trade worldwide, 90% of it today moves on water. So it's extremely crucial to countries across the globe, including us here at home in the United States. So we started to see surges in cargo to get product into the U.S. before new tariff milestones came out. We saw folks rushing agriculture and manufactured goods out of the country to different destinations to avoid tariffs in China. And then suddenly, when Covid-19 hit, the bottom dropped out of everything. Here at the Port of Los Angeles, we saw cargo drop about 19%, on top of that tariff driven decline of 16% to end the year of 2019. Then all of a sudden, the American consumer started to buy like we've never seen before, and those ships just started coming. We were moving more cargo than ever by day, week, month. But it was akin to taking ten lanes of freeway traffic in L.A. and squeezing them into five. At its worst point, we had 109 ships sitting outside of our port complex and more cargo on the way. The traditional nine big carriers that bring the container ships here to L.A. were met with another 15 new entrants to the trade. Companies that had been working in Asia, the Middle East and South Asia saw an opportunity with all this cargo to jump into the lucrative Trans-Pacific trade. And they loaded up their ships at very high prices, got all the way to the water's edge here in L.A. and sat because they didn't have contracts with terminal operators at the port. And that backlog, which seemingly impacted inland rail facilities, the carriers themselves, truckers and ports, just continued. When we looked at our statistics, if a container sat for eight days, it would likely sit for many more weeks beyond that. And in the end, to the chagrin of many of our industry, we levied a penalty against long aging containers at the port. $100 a day compounded daily if you didn't move your old containers off the port, I got letters from lawyers. My friends weren’t returning my phone calls. I did not go to as many New Year's Eve parties that year, but in effect, the simple threat of a fine got people motivated and cargo started to move off the port property, which allowed those next ships to come in quickly. And after having that fine and the threat of it in place for a little over a year. I'm proud to report we never charged a dollar, never invoiced anybody. It was just the motivation of collaboration, diplomacy and everything else. And then maybe a little bit of a nudge, monetarily, to see if we could uncork this thing and get the nation's supply chain moving here, on the West Coast, a lot better.
Spencer Levy
Doug, why don't you give us a global picture during the pandemic and today, how the shipping industry has changed.
Doug Norton
The ability to get supplies from a washing machine to a stove to wood to steel, everything was delayed. And it wasn't delayed a month. It was delayed two, three, four months. It took us six months just to get our stove. But industrially, we just, in the last three years, four years, we've seen… I mean, I've been at CBRE for 40 years. We've seen record growth in rents. Incredible decline in vacancy and just incredible demand. And now we're coming back to more normalcy in the market. So I would say the activity we're going to see in 2023, 2024 is going to be very much like 2017, 2018. Land prices have dropped down to 2018 prices. Vacancy rates in a lot of markets are creeping up to 3.5 to 5%, which is still very, very healthy. We were just in our regional conference in Southern Cal. It was held at the Westin in South Coast Plaza. And Jim Breeze, who's our global leader of industrial research, he said we're still going to have the third biggest year of leasing in history. And so we expect 725 million square feet of lease product by year end. The numbers are still incredible, even though the market has slowed.
Spencer Levy
Barbara, let's go a little tactical for just a moment. You used a lot of terminology about how the shipping business works. Let's keep it real simple for just a moment. Let's just start with a ship at sea coming into the port. Walk us through how that box gets off that ship and into the logistics within the United States.
Barbara Melvin
So an import coming from around the globe enters our harbor, and you have to have a harbor that can host that ship. And you have all dimensions of your harbor that are important: depth, width, turning basins for that ship. And by the way, ships are tremendously larger than they were back when we all might have built our facilities. So we've all gone through renovations of our terminals to accommodate the size of ships.
Spencer Levy
Let’s pause there for just a moment Barbara. I don't think the people realize just how big these ships are. Just tell the listeners how big the ships are.
Barbara Melvin
So just think of an aircraft carrier full of boxes, is really the easiest way to visualize the size of these container ships today. Gene can tell you a little bit better than I can, because in his port and in his basin, you're pretty much unloading the entire ship as to where on the East Coast you have a network of ports or multiple calls where boxes are taken off on the East Coast. So on the West Coast they would likely maybe call one port while on the East Coast they might call four. So we see the ships for a lot less time than Gene in L.A. and Long Beach, but the box comes off the vessel, moved by a ship-to-shore crane. It's placed on what's called a yard hostler and driven to its point of rest or a parking place in the yard, the terminal. And then it awaits a motor carrier, a truck driver, to come pick up that import and take it to its final destination, or to take it to the rail yard for it to be placed on the train, to be taken inland on its final destination. And then just think about the export being the exact reverse of that. It comes in through your gates, it sits in the yard, it waits for its ship to show up and be loaded onto the ship. And then it is off to the global marketplace. And that's really what our job as ports are, is to provide importers and exporters in the United States gateways to the world. And then from an economic development perspective, no more clear that our role in the supply chain is essential for fluidity. And certainly the transportation costs have an effect on the economy, both positively and negatively. And I know Gene and I are both ready for that to turn much more positive.
Spencer Levy
In light of the Los Angeles connection here, the cost of a 20 foot equivalent unit during Covid spiked to over $10,000 per transit between Asia and the U.S.. It's now down substantially. About what does it cost today and where was it at the peak of the pandemic, Barbara?
Barbara Melvin
Well, I have certainly heard rumors of what you just said about the cost for moving a box, say, from Asia on an ocean carrier to the U.S., whether that was the East Coast or the West Coast during certain times. But those rates have normalized. I think the East Coast, the last I saw, has held a bit stronger on rates from Asia than the West Coast. But I think the West Coast is starting to come up a bit and stabilizing back to what we saw pre-pandemic.
Spencer Levy
Is that a fair statement, Gene?
Gene Seroka
Yeah, absolutely. We heard wild stories during the pandemic because people were scratching and scraping for every container and vessel slot they could. And today, with new vessel capacity coming online, a little bit more even understanding of the U.S. economy and the consumers buying patterns, we're back down to freight rates that probably mirror what they looked like in 2018 and 19.
Spencer Levy
The aspect of ports I want to dig into now, Doug, is the real estate portion of those ports, and the real estate portion, specifically, the private real estate, the warehousing both in and around the ports. Tell us a little bit about what's there and how that works from a logistics standpoint, both domestically going from warehouse A to warehouse B, but also internationally, because we're talking about shipping goods around the world.
Doug Norton
Take a look at the most active states right now, the smile states, and those include the major ports. If you go to Charlotte or you go to Savannah or Houston, you can actually find land somewhat close in. And that's where you're seeing a lot of growth in those ports. If you're in Seattle or Oakland or Portland even, but especially L.A. and Long Beach, land is a jewel. We're working on a transaction now tearing down a 300,000 square foot class B/B+ office building off the 710, and we're going to turn it into either an EV charging yard for trucks or just an IOC storing boxes. There's such a demand for land close into the ports and it's very, very difficult to find. And so how do you handle growth, especially from the Central Valley? We're working with a million plus square foot chillbox that wants to be near a port. Well, I'm going, guys, good luck. How am I going to do that? We're getting creative, but it's a challenge on the land side. It really is a challenge.
Barbara Melvin
Just to pick up on that. It's a blessing here in the Southeast and particularly South Carolina. We still have very active investment in spec and we play that game as well as part of the port. And we work very closely with our commercial and industrial realtors to make sure that there is port dependent land available. We don't have the constraints of large population centers around our port and that, as you said, about Charlotte and other places, we can service that. So it's an important piece that you bring up that port- dependent land has to be protected when it comes up because you need that diversification of the land around ports so that you can have not just a population center to serve, but you also have the ability to do so with warehousing space, advanced manufacturing space and fulfillment space.
Gene Seroka
Los Angeles, unlike many other places, because of that geographical placement, you've got 10 million people in Los Angeles County, 20 million people living in the region. And our ability to connect and bring this waterfront and port closer to people throughout the region is really part and parcel of what we've been doing. The 2 billion square feet of warehousing under route from the shores of the Pacific to the desert region of California is the largest in the world. And yet with 4% vacancy rates, as Doug has said, it's still pretty tight. And you've got a lot of regulatory effect here on how you put these warehouses up, how you bring cargo to and from. And they're very different now. Traditional warehouse, cross dock facility, fulfillment center, value add facility. It is just an unbelievable mastery of what we can do here in connecting international trade to the ability to get products on the shelf or on your front doorstep. Much more work to do to be able to scale that as well, because we haven't done a good job as an industry. When you get this flood of cargo like we did it Covid, holy crow, it comes down to gridlock and what do you do? But utilizing this concept of inland ports that South Carolina has been known for years with Greer as an example, and the ability to bring that great automotive industry together under this concept is something we're attempting to replicate here. Big, big import section out of the Inland Empire. Think of Ontario, Fontana, Rancho Cucamonga, California, and then that breadbasket of California I mentioned in the Central Valley from Bakersfield, all the way up to Stockton. How we can better use land to have these importers and exporters feel a closer, tighter and more succinct connection to the ports is the goal that we'd like to replicate here?
Spencer Levy
Well, Doug, Gene brought up the concept. Tell us what an inland port is and how it works in the supply chain.
Doug Norton
The first major inland port I saw was Jo and U.P. had just laid concrete on almost 800 acres and just put a thought to that. 800 acres of concrete. And we were up in Center Point’s helicopter touring and basically an inland port is the same as a port, it’s a port of call. Product comes in and then it gets re shipped out to a different variety of users and locations or what have you. And it's such a need in Southern Cal for a major inland port. I know BNSF is going to try and do that in the west part of Phoenix in Buckeye and they have 3000 acres that they want to make it a major inland port and that will be a huge boost, I think, for Gene, your Long Beach counterpart and even your counterparts up in Oakland. I think that's a big win. We just have to move product from the port as quickly as we can into a destination where you really can break it down and ship it out from there.
Spencer Levy
By the way, because I was just curious, I just did the math, not myself, but on my iPhone, of just how big is 800 square acres? It is 1.25 square miles of concrete. That's a lot of concrete. But it also brings up the question of the interconnectivity between ships, rail, trucks. Barbara, could you walk us through just the interconnectivity of the three, how they work together? And I should also mention planes, because planes in the context of inland ports, in Texas, as an example, is maybe a competitor, but maybe not. I'll give you one other statistic that I read in The Economist. It was a few years ago, but what they said was that while 90% of the goods are shipped via ship, as Gene correctly pointed out, something like 75 or 80% of the value of goods is shipped via plane. Walk us through the interconnectivity between these four different modes of transit, Barbara.
Barbara Melvin
Well, certainly for us in South Carolina, we have built a healthy network of inland ports and we have two class-one railroads that help serve our port on the East Coast: the Norfolk Southern and the CSX. And we have built a facility on each rail line to give us access, in one case, 212 miles inland. And in the other case, about 160 miles inland. And then that puts you closer to a very significant portion of an inland population and typically then one day from major metropolitan areas. So just think about the speed to market that you can achieve with an overnight train service that leaves every day from a port area. And, you know, we have, in Greer particularly, Greer, South Carolina, which is in the upstate of South Carolina and the breadbasket of our advanced manufacturing area, we created an inland port with Norfolk Southern that was to mainly serve the automotive market of BMW. And we have in less than ten years achieved more than a million rail lifts. And I think most people would think that the success of an inland port is about 30000 to 40000 rail lifts a year, and we have consistently been well above 100,000 rail lifts. And starting off with that one customer, that one customer is now only about 30% of the total volume in less than ten years for that inland port. So you need cargo. People always ask what makes an inland port successful. First of all, I think you've got to ground the box. So you have to be able to put the box on the ground, not leave it on wheels so that that piece of equipment, that chassis can be utilized in a different way. So you've got to have a grounded facility with importers and a balance of exporters because class-one railroads don't like an imbalance train, so they like cargo that's going to go inland and cargo that's going to come back from the inland towards the seaport. And then how does truck fit into that? You've got to just change your thinking. You have a way to service the inland port, get more turns with your trucking company. It helps you not have to relay cargo with hours of service restrictions. You can utilize the rail as your relay points for that and you just shift your thinking and how you serve that inland port. And frankly, I think what Gene’s doing is critical for the success of supply chains in our country. We have to build more inland ports in the interior of the country so that equipment is available, both empties for our exporters. We're not as reliant on chassis pools because we can ground the boxes and it creates more inland destinations for our railroads and our trucking companies to call.
Spencer Levy
Gene, given your broader role of not just the head of the L.A. ports, but head of the infrastructure or the logistics in the region, I don't think it's a news flash to anybody that some of the roadways in L.A. are quite congested. And so how do you handle the vehicular traffic of day to day versus the commercial traffic of trucking and otherwise in what is such a densely populated region is a nice way to put congestion from time to time.
Gene Seroka
Yeah, this is probably the biggest issue we face and it's complex, nuanced, beyond what we all see every day just by looking out the car window. The cargo that comes to and from the port here in L.A. really falls into three segments. One is local, as I mentioned, because of the vast population that lives here, the companies that build products and ship them out. The second goes to these Inland Empire locations with a great warehousing, distribution and cross dock facilities exhist. And then the third is that intact ocean box that comes from Asia through the port, gets loaded onto the rail on dock, and then goes out to one of 14 different distribution centers within the country. So break all that down. The interdependencies are really, really important and that collaborative relationship is a must every single day between railroads, truckers, the intermediaries I mentioned earlier, the shipping lines, importers, exporters and so many others. Think of federal, state and local agencies that help us invest in infrastructure, manage cargo, and even regulate air and water pollution. Now, of all the cargo that comes here to L.A., about two thirds leaves the port complex by truck going to that local market, that Inland Empire segment. That's about 60,000 truckloads a day that are moving all over the place in a very choreographed orchestra of events. But at the same time, these truckers get paid by the run. So this must be a transit facility. We don't want them waiting in long lines and sitting, idling, putting more pollution in the air. So you've got to get this thing really switched through a port-wide reservation system that allows us to take advantage of those truckers and the ability to move cargo in and out. Today, at the port of L.A. we're only utilizing about 50% of our available truck gates every day because many don't want to pick up the cargo very fast. Warehouses are full, sales are a little bit up and down. And the marketplace is such where sometimes you want to stretch out that supply chain in order to get your landed domestic product at the right place at just the right time. So we've got an efficiency uptick there that can be augmented by information technology and be able to scale capacity just by managing your process a little better. This concept of the inland container yard or however it's fashioned is absolutely essential here now, through a clearer lens, because you get a 30 year cargo going out to the IEEE. Why not have a parcel of land that allows you to run that product out overnight when the traffic is lower on the freeways? You're not challenging commuters and school busses with kids trying to get their education, and you have a more seamless way of running out that 50 to 70 miles of distribution requirement. Then, accessorized by the Alameda Corridor, which was built about 23 years ago here in Southern California, that put into place more than 200 grade separations, allowing all that traffic to move over the rail site for 22 miles, connecting the port to its downtown rail facilities for the Union Pacific and the BNSF. So all of these look like two big pieces. One, it's investment in assets with some really smart people that can help coach us up on how to do just that. And the other is process management. We're a landlord port, a little bit different than Barbara, but we rely on those private sector companies of terminal operators and other conveyance backgrounds to move the cargo. But assembling a team that has had broad experience in the industry, trying to take a little bit bigger responsibility in that process, management seems to be a sweet spot that we're working toward.
Spencer Levy
Doug, we have all these modes of transportation. It emits a lot of carbon. What are we doing now within the warehouse side of the business to try to mitigate that, and how central are ESG issues in the port logistics warehouse business?
Doug Norton
Well, it's becoming a huge, huge center of attention, is on the EV side. We recently had a meeting with Daimler, who's the world's largest truck manufacturer, and they have just a line of incredible EV trucks that they want to sell and they want to get on the road. But we have to build the EV charging stations first. To charge a fleet of EV trucks, you need about 1.5 megawatts per acre. So dealing with SCC or dealing with PG&E or dealing with Vernon Power, it gets very complex to find these land sites that can handle the power. And then these trucks weigh two x what a normal truck weighs. So then you've got to be careful about the roads and the dock well and the queuing of trucks and the weight that impact that these trucks are going to have. It's really amazing the technology flying through our system right now. The amount of technology and money being spent to restructure our way of transportation with trucks is just unbelievable. And I know that CB is investing a huge amount of money in it. And I know that Gene and Barbara are very, very interested in supporting these initiatives so that we can get those electric trucks or hydrogen trucks or a combination thereof on the road and servicing our customers.
Spencer Levy
I'm going to bring up one more big issue and then we're going to ask for final thoughts, if you don't mind. And that is labor. Gene, how do you address the labor issue question within shipping?
Gene Seroka
The institutional knowledge of the people we have here doing this trade transportation business is just awe inspiring. For every four containers we move, we create a job. Today in Southern California's five county area, we support one in nine jobs. That's a million paychecks every week of families that count on us to keep this trade business humming at the ports. And it's from administrators like myself to real estate experts to dock workers and truck drivers and warehouse workers that all count on this complex. So we, too, are inextricably linked. And one of the things that we thought might be additive to this great workforce is to build a goods movement training campus, because we know in our industry the technology is moving faster than it ever has. And with the subject of robotics or automation at ports here on the West Coast, it's the most polarizing conversation we have. But recognizing that speed of technology, that's fine, but we cannot leave the workforce behind. So our idea here is if you're of my vintage and you need to be upskilled or reskilled to manage different types of technology, super. We need to attract, recruit and retain younger folks to be the workforce of the future and be able to bring them into an environment of supply chain transportation ports. When you live in an enclave with some 260,000 people who see this port just about every day and want to get involved. So once again, trying to bring the water a little closer to the people and seeing how we can accentuate the positive of an economic engine like all of our ports are around the nation, and trying to take that extra step as municipal government to get people involved and interested in making this their career as well.
Spencer Levy
We're dealing right now with some increased labor issues. The UAW just went out on strike. The Port of Los Angeles has been well reported. You've had labor issues there as well. How's it going? Do you have an opinion on that, the future of that and how do we deal with that in the shipping context?
Gene Seroka
Yeah, it's been the convergence of so many things happening all at once in our industry. And if we look back now, it truly has been the summer of discontent. A two and a half year rail negotiation. School teachers and custodial staff at the second largest school district in the nation going through contract discussions. The Teamsters, UPS truck drivers, 360,000 drivers and their negotiations. The dockworkers on the West Coast negotiated for 13 months and just recently ratified their agreement with the Pacific Maritime Association. And as you rightly say, now, we've got the United Auto Workers for the first time picketing in front of each of the big three factories right now in the states of Michigan, Ohio and Indiana. In addition to that, the writers and producers here in Hollywood have been out on strike, trying to get a grip on what all of this streaming content means compared to what it looked like with linear television and cable. Just unbelievable time in American history for the worker. But we're also seeing with generational profits in different industry segments that that workforce needs to be paid. And that's what we've been seeing as the outcomes. But there are a lot of bumps in the road between that and the end result, which we're all kind of struggling through right now. The work here at the Port of Los Angeles never stopped, just like at the South Carolina Port Authority and the Great Port of Charleston. These workers were on the job every day. Our ILWU dockworkers averaged six days a week. They were taking up second shifts, turning two. They were out there as often as they could. I would argue we didn't have enough. We could have hired even more from private sector industry to bring in those skilled laborers that move all that cargo.
Barbara Melvin
So currently we've had absolutely no impact from any labor challenges, and that means from our East and Gulf Coast ILA partners or just labor in general. Hiring into our ports, hiring our equipment operators and maintenance folks. So it's still an attractive job. And I think, Gene, we've done a good job as ports taking advantage of the supply chain crisis by highlighting how important what we do is. It’s something you can be proud of every day. And certainly from the professional side of our industry as well. I think the best and brightest are now positioned directly by CEOs of some of these major shippers talking about the impacts of fluid supply chains on the bottom line. So I think just in general, our industry will benefit from what seemed to be only dark clouds for just about 18 months. You know, the way we look at labor challenges in the future, because in the southeast, labor is still readily available, is: How do we utilize technology to not necessarily replace jobs, but absolutely make them safer and more productive. So an augmentation for our workforce. And I think from that perspective, if we go into it as an operating port here in the South, I have two jobs. I'm supposed to facilitate waterborne commerce and generate economic development. And we define that as a good job. And so our one in ten jobs that we support here, either directly or indirectly, are important. And if we look at it through that lens, we'll be successful.
Spencer Levy
Doug, one other big picture question. Manufacturing versus raw goods coming out and manufacturing, many people are suggesting, is about to see a renaissance in the United States. How much does the shift in manufacturing locales come up in your conversations about where you are going to put warehouses and how much do you think it's going to change shipping within the United States?
Doug Norton
We're seeing a sharp increase not only in chip manufacturing, but in auto manufacturing, which Barbara obviously is experiencing on the right coast. And the truck manufacturing, the battery manufacturing, we're seeing probably five or six major battery plants being built in the U.S. right now. Our sister country to the south, Mexico is – in Mexico City and in Monterrey and a couple other cities, they're seeing a sharp, sharp uptick in manufacturing. And their ports are actually growing where the U.S. ports took a little dip. So to how it's affecting shipping, a lot of goods for manufacturing are coming to the U.S.. So we're seeing not just the 3PL, the 4PL or the 5PL. From a global standpoint, the U.S. is seeing a sharp uptick in manufacturing. You're going to see industrial clusters and you're going to see where there's power and there's water and there's ability to grow a population. You're going to see large industrial clusters spot across the U.S.. I know in Texas, Xebec Realty has a 33,000 acre piece of land that they purchased, and they're building an industrial cluster of over 11,000 acres, which will have, again, the power to do all the data centers, to do all the DC’s, to do the manufacturing and has the water, too. So you'll see a shift to large industrial clusters. Absolutely.
Spencer Levy
So Barbara, would love thoughts on where you see the shipping industry going in the next few years. What are some of the big things ahead?
Barbara Melvin
Truly, the opportunities are tremendous here in the Southeast and we concentrate, as we should, on building additional infrastructure and advancing our operational excellence. And that benefits our customers, whether they be the ocean carriers, the end customers, the BCOs or importers or exporters. That benefits the environment if we're operating well, as Gene has pointed out. Idling trucks create air emissions that are unnecessary if we're doing our jobs. And I think that that infrastructure investment, our concentration on having infrastructure water side, rail side inland really makes the southeast a burgeoning place for the business that we are investing heavily to handle. And I think we'll be a very important gateway here as a result of that. So the Southeast’s future is very bright, and I think that's from a retail perspective with growing population base as well as an advanced manufacturing perspective, because imports go to where people live and exports typically come from where most people don't live. And we have that great balance in the Southeast, supported by the investments in our port and the support of our elected officials.
Gene Seroka
I think the biggest thing that we take away from this discussion today is, each one of these ports in America is so essential to our economy. The West Coast ports make up about 12% of the nation's GDP. The good middle class jobs. The ability for companies to invest in talent is all right there in front of us. And I'm glad that we had that white hot spotlight on us when it was the toughest for all of us in this supply chain because it led to generational investment from the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, state budgets. People now talk to Barbara and me with a very different light because they've learned a lot about supply chain and ports. Folks have come to us talking about how they could help, how they can bring those big thinkers to the table to make these ports even better. So it's an opportunity to capture that spotlight because it was never too bright. And let's turn it into a good creative investment and work going into the future.
Spencer Levy
Doug, last word to you. You have a global vision, been in the business for 40 years. What do you see as the big trends over the next five years or so within logistics, shipping and ports?
Doug Norton
Well, I first want to say that I sleep better at night knowing that Gene and Barbara are in the positions they are in. And I just wanted to say thank you. Your ports are critical in the world supply chain movement of goods. You are just two exceptional people. So thank you very much. You know, Spencer, it's like it's a Gretzky. It's not where the puck is right now. It's where the puck is going to be. And we have to really prepare ourselves. And I know that even like the port of Savannah, the additional cranes they're bringing in, the deepening of the canal, the availability of land, the port that will go out and they'll like for the key to plan. They went out and bought the land and then resold it to Kia. So being innovative that way I think is critical. The education on labor that Gene was talking about is so critical. It is so critical that supply chain is being recognized the way it is today, from a political standpoint. We're going to see these industrial clusters. We're going to see cooperation between government and ports and air and cargo and liners. I think the world's coming together to make it just a better place. And I think there's some real innovative people out there and I just wish there were more land in the Inland Empire that I could sell because there ain't much left. It's going to go to Palm Springs. I'm telling you, it's going there.
Spencer Levy
Well, on behalf of The Weekly Take, I want to thank Barbara Melvin, CEO of South Carolina Ports Authority, for joining us today on our ports episode. Barbara, terrific job. Thank you for coming out.
Barbara Melvin
Thank you, Spencer. Doug and Gene, pleasure and honor to have been on this discussion with you.
Spencer Levy
And as Barbara mentioned, Gene Seroka, Executive Director of the Ports of Los Angeles and broader responsibilities around logistics in the Los Angeles region. Gene, terrific job.
Gene Seroka
This has been a real treat. Spencer. Thank you. And to spend time with two folks that I consider friends in this industry. Just really, really great. Thank you.
Spencer Levy
Fantastic. And Doug, our friend and colleague. Doug Norton, Senior Vice President, CBRE who leads our ports practice. Doug, terrific job as well.
Doug Norton
Thank you. And Barbara and Gene, you guys are the best. And Spencer, it's always a joy to spend time with you.
Spencer Levy
For more on ports and related content, please visit our Website, CBRE.com/TheWeeklyTake. To connect with us directly, drop anchor at the “Talk to Us” button right there on the home page. And don't forget to subscribe, rate and review us wherever you listen. We've got lots more to deliver in the coming weeks, including an episode on another important industrial sector: data centers. We'll also visit with a visionary entrepreneur who is disrupting restaurants and real estate. And we'll return to CBRE’s Power of WE Conference for a conversation with some of the top women executives in the industry. We're spanning the nation to share a diversity of ideas and perspectives from the best minds in the business. For now, I'm Spencer Levy. Be smart. Be safe. Be well.
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