LOS ANGELES—Export cargo volumes at the Port of Los Angeles and the Port of Long Beach have plummeted, with double-digit decreases in recent months when compared with this time last year, according to research from NAI Capital. Due to the sharp decline of exports industrial real estate demand is particularly strong for warehouse space used to store imported products, while demand for manufacturing space is dwindling.
“The European economy is not doing as well, so the pricing of our products has become more expensive,” J.C. Casillas, director of research at NAI Capital, tells GlobeSt.com. “There is such a big gap between exports and the inbound loaded cargo volume. It has always been known that the US has a trade deficit, if you will. When you start drilling down at the numbers, the export volume is clearly in a double-digit decrease. I can’t point to any particular product, but certainly L.A. County continues to loose manufacturing jobs. In the context of the industrial markets, all of the tenant types are looking for warehouses versus manufacturing facilities, and that is mostly to handle the import volume.”
Below are several graphs Casillas prepared to illustrate the decline in export cargo volumes.
Import cargo volume also saw an, albeit smaller, decline recently when compared to this time last year. Although, Casillas explains that this is likely due to the recent port strike and the threat of a future strike. However, he expects import volumes will pick up following China’s recent devaluation of the Yuan. “Everybody looks to China as an export-driven consumer market,” says Casillas. “When they devalued their currency, it makes their goods cheaper. China is one of the biggest trade partners with the US, and our consumer base, which is one of the largest in the world, is going to want to seek out those products.”
Despite these challenges, however, the industrial market in the greater Los Angeles area is still extremely active with a 3.5% vacancy rate overall and vacancy rates around the port points of entry as low as 2.7%. “From an industrial perspective, we always look to the ports as a key indicator of what is going on in the market,” adds Casillas. “If I am an owner, and I have a manufacturing facility, I am going to know that, based on this key driver, imports are probably going to surge.” He explains that, as a result, many manufacturing spaces are being converted into warehouse space, which is in the most limited supply of industrial product.