Executive Briefings

Last Year's West Coast Labor Strife Boosts New York/New Jersey, Houston, Savannah, Index Shows

The balance of seaborne-cargo delivery in the U.S. shifted further east in the last year, resulting in East Coast seaports making gains against their West Coast counterparts in CBRE Group Inc.'s second-annual North American Seaports and Logistics Index.

The Port of Long Beach snared the top spot from its Southern California neighbor, the Port of Los Angeles, due mostly to the arrival of a new Asian shipping line in Long Beach. However, most of those on the rise in the top 10 are East and Gulf Coast seaports.

“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.”

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 primary 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 climbing 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.

Meanwhile, on the West Coast, 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.

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 volume last year in North America, down from 54 percent in 2014 and 57 percent in 2010.

“The industry premonition that 2015 was the year of the East Coast was born out in the overall stats and in the way our rankings turned out,” said David Egan, CBRE’s Head of Industrial & Logistics Research in the Americas. “It demonstrated that the benefit to the East Coast from the turmoil on the West Coast is real and quantifiable.”

That continued eastward shift means that the scheduled 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 was shifted 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. However, due to the numerous, persistent pressures faced by shippers, retailers and suppliers, it is likely those companies will continue to weigh such decisions over the next several years.

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.

Source: CBRE

The Port of Long Beach snared the top spot from its Southern California neighbor, the Port of Los Angeles, due mostly to the arrival of a new Asian shipping line in Long Beach. However, most of those on the rise in the top 10 are East and Gulf Coast seaports.

“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.”

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 primary 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 climbing 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.

Meanwhile, on the West Coast, 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.

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 volume last year in North America, down from 54 percent in 2014 and 57 percent in 2010.

“The industry premonition that 2015 was the year of the East Coast was born out in the overall stats and in the way our rankings turned out,” said David Egan, CBRE’s Head of Industrial & Logistics Research in the Americas. “It demonstrated that the benefit to the East Coast from the turmoil on the West Coast is real and quantifiable.”

That continued eastward shift means that the scheduled 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 was shifted 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. However, due to the numerous, persistent pressures faced by shippers, retailers and suppliers, it is likely those companies will continue to weigh such decisions over the next several years.

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.

Source: CBRE