2022 Global Seaport Review

Demand drivers for logistics property

The industrial and logistics sector is experiencing record demand as companies expand their real estate footprints to keep up with rising e-commerce sales and diversify supply chains to prevent disruptions and control inventories.

Figure 1: Key drivers of logistics demand

Source: CBRE Global I&L Outlook, November 2022.

Companies are enhancing their distribution capabilities to protect inventories from global supply chain disruptions, like those caused by the pandemic, as well as fallout from other issues, such as congestion and closures at ports, blockages along key shipping routes and the ongoing war in Ukraine.

To address these challenges, companies are locating their facilities near global transportation hubs, especially seaports. These hubs drive industrial real estate markets and are typically at the center of large clusters of logistics distribution facilities. Seaport-adjacent facilities also provide value-added services such as production, storage, customs clearance, packaging and processing for the enormous volume of cargo moving throughout the global supply chain.

Figure 2: All markets witnessed an acceleration of e-commerce sales during the pandemic

Source: CBRE Global I&L Outlook, November 2022.

Seaports as major global logistics hubs

Seaports have evolved over the decades, with the adoption of container shipping, the diversification of cargo types and equipment, better intermodal transportation of containers and advancements in port technologies. Today, major seaports typically connect to geographically concentrated and mutually related business facilities centered around transportation, trade, and industrial production and distribution. Global seaports distribute on a very large scale, often via Panamax container ships able to hold at least 5,000 20-foot equivalent units (TEUs).

Container volume trade increase

Trade volumes are growing rapidly amid an increasingly global consumer landscape. Between 2012 and 2021, global TEU volumes grew 36.5% to approximately 850 million TEUs. More than 80% of world merchandise trade is currently seaborne, of which more than half (by value) is shipped in ocean containers.

Long-distance transocean trade routes, along with a new class of post-Panamax container ships (vessels able to carry more than 20,000 TEUs), enable shipping companies to take advantage of economies of scale and reduce costs.

Figure 3: Container throughput worldwide has increased considerably over the last 10 years

Source: Statista, April 2022.

Global supply chain pressures

In January 2022, the Federal Reserve Bank of New York introduced a new measure, the Global Supply Chain Pressure Index (GSCPI), to gauge supply chain conditions by combining several transportation and manufacturing metrics, including delivery times, pricing and inventory. The GSCPI data set tracks activity back to 1997.

Following some fluctuations prior to 2020, the GSCPI surged at the beginning of the pandemic amid strict lockdown measures. The index fell briefly during the summer of 2020 when world production started to recover, before rising again at a dramatic pace as the omicron variant spread worldwide.

Supply chains were pressured in 2020 and 2021 because of a surge in online spending amid a backdrop of capacity constraints, equipment shortages, renewed virus infections in some parts of the world (including at the critical Yantian Terminal in Shenzhen, China) and a one-week closure of the Suez Canal, when the 1,300-foot Ever Given container ship was temporarily trapped due to strong winds, preventing other vessels from passing through. Many of these factors continue to cause instability in the supply of key materials and components for global industrial production.

Figure 4: Global Supply Chain Pressure Index and major supply chain disruptions

Note: The Global Supply Chain Pressure Index (GSCPI) combines variables from several indices in transportation and manufacturing, such as those related to delivery times, prices, and inventory, to measure supply chain conditions. A measurement above zero indicates more supply chain pressure than usual, while a reading below zero indicates less pressure.
Source: CBRE Research, Macrobond, Federal Bank of New York, Q3 2022.

Container shipping costs surge

The rising cost of shipping has greatly impacted companies engaged in global distribution. Though ocean shipping rates are falling, they remain much higher than pre-pandemic levels. According to the Freightos Baltic Index, which represents a weighted average of spot shipping rates for a 40-foot container across 12 major global routes, rates steadily increased after COVID-19’s onset and skyrocketed following the Suez Canal blockage. Rates rose from $1,400 at the end of March 2020 to $11,100 in September 2021, before settling down to a still-elevated $3,450 as of mid-October 2022.

Figure 5: Container-shipping costs were affected by prolonged supply chain disruptions

Note: Global Container Freight Index represents the market rate to ship a 40-foot equivalent (FEU) container.
Source: Freightos, October 2022.

According to estimates from maritime data provider Lloyd’s List, $9.6 billion worth of trade was held up daily because of the Suez Canal blockage, topping $50 billion by the time the canal was cleared. However, this figure excludes the broader impact to trade and economies globally, as commodity prices increased because of the uncertainty.

As a result, ports had to simultaneously deal with both scheduled and delayed ships, adding more stress on the global shipping system. The blockage occurred amid pandemic-induced labor shortages in U.S. ports and COVID-related disruptions in Chinese ports, and coincided with a surge in demand for manufactured goods, pushing up shipping rates.

While costs have fallen as consumer demand stabilizes and port activities normalize, they are still significantly above pre-pandemic prices. The United Nations Conference of Trade and Development (UNCTAD) estimates that elevated container freight shipping costs will add 1.6% to consumer prices globally in 2023.

Transportation large part of logistics costs

Transportation accounts for 45% to 70% of total logistics spend, according to CBRE Supply Chain Advisory. This compares with 3% to 6% for fixed facility costs, including rent, and 15% to 25% for variable facility costs, including labor. In other words, it pays for companies to locate distribution infrastructure as close to ports as possible—even as still-high shipping rates fall—as the savings on transportation costs can materially benefit occupiers of industrial real estate.

Figure 6: Logistics costs

Source: CBRE Supply Chain Consulting, H1 2022.

What are the ongoing key risks to watch?

While there have been signs that supply chain disruptions eased earlier in 2022, there are several evolving economic and geopolitical challenges:

With global supply chain pressures expected to continue into 2023, it’s essential for companies to build adaptable and resilient distribution solutions. This is driving increased demand for warehouse space, particularly in well-established and emerging seaport locations, creating opportunities for industrial and logistics property owners and investors.

Global port city map

Source: CBRE Research.

Historical TEU volumes across major ports

*Fiscal year
CBRE Research; UNCTADSTAT Port Liner Connectivity Index.