The San Pedro Ports Complex – consisting of the Ports of Los Angeles and Long Beach – have seen a significant amount of activity over the past several quarters. As some of the largest economic drivers of the Southern California industrial market, the ports recorded their second busiest year on record during 2022, a recently published fourth quarter Port update from Cushman & Wakefield showed.
Overall, the total container volume for the San Pedro Ports reached 19 million twenty-foot equivalent units (TEUs) in 2022. While 5.1 percent lower than last year’s TEU volume, the amount is 9.9 percent higher than 2020’s total, according to the report, and the 10-year annual TEU average has been 16.9 million, with a year-over-year growth rate of 3.2 percent.
Rooney Daschbach, managing director at Cushman & Wakefield, explained the past several years of record growth have likely been caused by population in the area as well as consumerism.
“Met with record volumes, the Ports of Los Angeles and Long Beach were both backlogged for more than two years, beginning in October 2020 and peaking in January 2022, partly due to heavy congestion as demand exceeded capacity. In November of 2022, The Marine Exchange of Southern California announced an end to 25 months of ship backlog,” Daschbach said.
A majority of the activity was seen in the Port of Los Angeles. As the busiest seaport in the Western Hemisphere, according to the report, the Port of Los Angeles consists of 43 miles of waterfront and about 7,500 acres of land. At the close of the year, the Port of Los Angeles handled a total TEU volume 10 million, an overall decrease from last year when more than 10.5 million was recorded.
Likewise, the Port of Long Beach handles trade valued at $200 billion annually, serving 175 shipping lines with connections to 217 seaports around the world. In 2022, the Port handled more than 9.1 million container units compared to 9.4 million in 2021.
In general, the San Pedro Ports Complex has a major impact on Southern California’s economy, according to the report, as a significant generator of jobs, commerce and tourism. Throughout the state of California, nearly one million jobs are related to the Port of Los Angeles alone, and 575,000 jobs in Southern California are connected to the Port of Long Beach. As a whole, one in nine jobs is connected to the San Pedro Ports Complex throughout Los Angeles, Orange, Riverside, San Bernardino and Ventura counties.
With such large influence, the ports have a major impact on Southern California’s industrial market as well. According to Rooney, substantial increase in cargo volume at the port typically leads to high absorption rates and heightened occupancy gains. In 2022, however, activity was slightly slower due to lack of available industrial space.
“Scarce existing supply in the market hampered activity throughout 2022 resulting in a decrease in leasing activity compared to 2021’s record high leasing volume. However, strong tenant demand has persisted, particularly among big-box buildings 250,000 square feet and larger where activity has remained consistently healthy. Further, despite the slowdown in leasing velocity, the IE still ranked 5th in the nation for new annual leasing activity,” said Daschbach.
Overall, the Greater Los Angeles area has one of the most prominent industrial markets in the nation, according to Cushman & Wakefield. The overall vacancy rate in the region hit its historic low in the first quarter of 2022 at 0.8 percent, but has since increased to 1.3 percent as of the fourth quarter. This rate still remains low, however, compared to the same time in 2020 when a 2.7 percent vacancy rate was recorded. Because of the lack of new product coming online, absorption in the fourth quarter came in at negative 1.4 million square feet. However, the region still reported 3.3 million square feet of net absorption for the year.
“We are fortunate to be in a Greater Los Angeles market that is critical to the supply chain and attracts such great demand, and therefore industrial/warehouse rental rates have not seen much if any decline at this point in the cycle. Importantly, despite a decline in volume in the second half of 2022 at the San Pedro Ports Complex, it cannot be overlooked that collectively 2022 still achieved the second-highest annual container unit /cargo volume ever on record,.” said Daschbach.