East & Gulf Coast Seaports Gaining Cargo Share from Still-Dominant West Coast Seaports

As U.S. importers, shippers and distributors diversified their supply chains last year to avoid disruptions, major East and Gulf Coast seaports saw increased cargo volume at the expense of the two dominant West Coast seaports. The ports of Los Angeles and Long Beach, CA, which handle almost one-third of total U.S. overseas cargo annually, had a combined 5.1% decrease in cargo volume last year, compared with gains of 1.5% to 14% for major East and Gulf Coast seaports.

Over the past five years, the two California ports have averaged an 8.5% increase in cargo volume, while the major East and Gulf Coast ports have recorded increases of 20% to 47%. Nevertheless, the ports of Los Angeles and Long Beach together moved more than 19 million TEUs (twenty-foot equivalent cargo units) in 2022, far outpacing TEUs moved at all other ports.

Companies likely will continue to diversify their ports of entry amid upcoming labor negotiations between port authorities and their workers. The West Coast ports have yet to finalize a labor agreement that has been in negotiations since July 2022. East Coast ports are expected to begin labor contract negotiations this year, well ahead of the September 2024 expiration. How these new agreements might cause shifts in supply chains remains to be seen, although the cost of shipping a container from Asia to the East Coast will remain nearly twice the cost of shipping it to the West Coast.

Figure 1: Annual TEUs Moved in Major Ports

Note: San Pedro Bay is the combination of Port of Los Angeles and Port of Long Beach.
Source: Various Port Authorities, CBRE Research, December 2022.

Seaports play an important role in supply chain management and demand for industrial & logistics real estate, as noted in CBRE’s 2022 Global Seaport Review. Major port labor fundamentals remain strong, each with at least 4.5% projected employment growth over the next 10 years. The Port of New York/New Jersey has the largest market-wide warehouse/distribution labor force at more than 250,000, while Savannah has the lowest at just over 11,000. Because of its low base, Savannah is expected to see the highest employment growth (15%) of all major seaport markets over the next 10 years. Los Angeles/Long Beach, which has the highest median hourly wage of $20.16, is expected to see the lowest employment growth at 4.5% over the same period.

Figure 2: Labor Fundamentals in Major Port Metro Areas

Source: CBRE Labor Analytics, December 2022.

High growth in cargo volume and employment, coupled with low rental rates, has led to increased activity at the ports of Savannah, Charleston and Houston. Last year, Savannah had the most net absorption as a share of its total I&L inventory (15.8%), followed by Charleston (11.3%) and Houston (5.1%). Average taking rents in all three markets are under $6.50 NNN per sq. ft., well less than half the level in New York/New Jersey and Los Angeles/Long Beach. Meanwhile, Savannah and Charleston have undergone significant operational improvements in recent years to increase their cargo-handling capacity.

Figure 3: Growth Rate* & Average Taking Rents** in Major Port I&L Markets

*Growth rate equals annual net absorption as a percentage of existing inventory.
**Includes new leases and renewals 10,000 sq. ft. to 699,999 sq. ft. 12 month or longer lease term.
Source: CBRE Research