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4/29/16
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The Port of Long Beach snared the top spot from its Southern California neighbor, the Port of Los Angeles, on CBRE Group Inc’s second-annual North American Seaports and Logistics Index, due to the arrival of a new Asian shipping line, strong operational infrastructure and outstanding local industrial real estate market. However, the balance of seaborne-cargo delivery in the U.S. shifted further east in the last year, resulting in East and Gulf Coast seaports making gains against their West Coast counterparts.
The renewed momentum for eastern ports can be attributed, at least in part, to shippers shifting cargo east in response to last year’s labor trouble at West Coast ports. Cargo traffic at western ports was slowed for months before the longshoreman unions and port management came to a resolution in March 2015.
The West Coast labor disruption indirectly contributed to two East Coast ports and one Gulf Coast port rising in the CBRE rankings, with the Port of New York and New Jersey climbing one spot to No. 2 overall, the Port of Savannah ascending two spots to No. 4 and the Port of Houston leaping five spots to No. 5.
With healthy volume growth of 5.4 percent in Q4 2015 and annual growth of 15 percent, Long Beach’s experience in 2015 contrasts with that of its neighbor, Los Angeles. Long Beach’s growth was driven in part by the arrival of a new Asian shipping line, which suggests that the growth is sustainable. Along with strong infrastructure and an outstanding real estate market, this was enough to boost Long Beach to the top of the Index. The Port of Los Angeles, which posted an uncharacteristically slow year, fell two spots to No. 3, and the Ports of Seattle and Tacoma fell two spots to No. 6. The Port of Oakland, hindered last year by the closure of its Ports of America Outer Harbor Terminal, tumbled five spots to No. 10.
“Much of the cargo that transitioned to the East Coast last year is slowly returning to the West Coast,” said Kurt Strasmann, Senior Managing Director of CBRE’s Orange County operations and Southern California Industrial & Logistics Market Leader. “Los Angeles and Long Beach are well-positioned being among the very few ports that can handle the new mega ship containers, such as the US Benjamin Franklin. Only a few ports can accommodate these larger shifts due to water depth. The Long Beach/Los Angeles ports are one of only a few in the U.S. that have the infrastructure for these new mega ships.”
He added, “The West is still exceptionally well-positioned to retain and grow its business. First, it’s still the fastest, most efficient route from Asia; secondly, about 50 percent of the product stays locally within the region and lastly we have the operational infrastructure that allows our ports to operate very efficiently.”
Overall, the major East and Gulf Coast ports accounted for nearly all of North America’s gain last year in cargo volume, whittling away at the West Coast’s traditional dominance. West Coast ports accounted for 52 percent of all TEU (twenty-foot equivalent units) volume last year in North America, down from 54 percent in 2014 and 57 percent in 2010.
That continued eastward shift means that the June 2016 opening of the widened Panama Canal, which will allow substantially larger ships a faster route from the Pacific to East Coast ports, likely won’t register as large an impact on cargo destinations as previously thought. Much of the cargo that could be transferred from West Coast delivery to East Coast delivery without substantial extra cost has already been shifting in recent years.
In addition, the cost savings of big ships passing through Panama to get to East Coast ports rather than navigating around South America aren’t significant enough to spur an accelerated shift to East Coast ports.
“Companies today are facing monumental supply chain pressures due to changing consumer behavior and a need to balance cost and service while keeping their business safe from interruption,” said Adam Mullen, Occupier and Supply Chain Leader in CBRE’s Industrial & Logistics division, the Americas. “Recent shifts in port volumes as companies strain to determine their best global shipping routes underscore that global commerce is in a race – an arms race of sorts – to build better, even more efficient supply chains.”
CBRE’s North American Seaports and Logistics Index takes into account both port infrastructure capabilities, such as total TEU volume, and the fundamentals of the industrial real estate market surrounding each port. The former receives slightly greater weighting. For example, the Port of New York and New Jersey ranks No. 1 in terms of port infrastructure but it weighs in at No. 6 for real-estate fundamentals. That amounts to an overall ranking of No. 2.
*TEU volumes were sourced from the port authorities for each port.
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