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The Port of Los Angeles and Port of Long Beach are the two largest ports in the nation and handle approximately 40% of the nation’s total containerized import traffic and 25% of its total exports.
Trade that flows through the San Pedro Bay ports complex generates more than 3 million jobs nationwide. The financial collapse of shipping giant Hanjin Shipping Co. continued to affect cargo volumes at the Los Angeles and Long Beach ports. With healthy volume growth so far this year, Port of Los Angeles’ experience contrasts sharply with the neighboring Port of Long Beach. In October, cargo volumes at the Port of Los Angeles increased 15.6% compared to the same period last year, marking the busiest month ever at a Western Hemisphere container port. With total cargo volumes through the first ten months of 2016 at 7.2 million TEUs, it represents an increase of 5.25% percent compared to the same period in 2015. Meanwhile Long Beach, which depends heavily on Hanjin carried cargo, saw its cargo volume decline 4.75%.
(Note: Hanjin owns a majority stake in the Long Beach-based Total Terminals International, which accounted for about 12% of Long Beach’s cargo volume last year.)
The port markets of Los Angeles/Long Beach, New York/New Jersey, Savannah, Oakland, Virginia/Norfolk, Seattle/Tacoma, Houston, Charleston, Baltimore, Miami, Jacksonville, and Ft. Lauderdale comprise 28.6% of U.S. industrial inventory with a footprint of 4.0 billion square feet. U.S. port markets absorbed 55.1 million square feet (msf) of space through the third quarter of 2016, propelling the overall U.S. industrial year-to-date net absorption to 213 msf, up 18% from the same period a year prior. Those banner numbers do not occur without healthy port markets, which accounted for 25.8% of the net absorption registered year-to-date. The U.S. industrial vacancy has fallen to its lowest level of the past 30 years at 5.6%, with vacancy in the major port markets even lower at 4.0%.
Hanjin’s collapse is by far the largest container shipping bankruptcy in history and the consequences will continue to be felt throughout the international supply chains and the transportation sector. However, the impact of Hanjin’s bankruptcy on U.S. industrial real estate will be minimal. It will not undermine the growth trajectory of the U.S. industrial market or derail leasing at U.S. port markets. That is important because the major port markets underpin the national industrial sector and are essential to its performance. U.S. port markets accounted for 35.9% of U.S. total leasing activity so far this year. Longer term, the supply/demand imbalance facing global container shipping could be more significant. A major realignment in the shipping industry due to the imbalance could impact supply chain costs, port traffic, and commercial real estate strategies used to mitigate inventory risks. This would impact both owners and occupiers of industrial real estate.
For more information contact:
Managing Director, U.S. Industrial Research
+1 310 525 1918