The escalating trade war with China will be leading U.S. retailers to speed up the import of goods coming from Asia’s largest economy to avoid brand-new tariffs as well as also ensure they have adequate supplies for the winter holidays.
Executives say nervous importers pushed forward shipments into the Port of Los Angeles which would certainly normally arrive later from the year into July due to uncertainty surrounding the U.S.-China trade fight as well as also looming tariffs proposed on a variety of imported consumer products. As a result, the surge in goods coming in has exacerbated the already tight availability of warehouse space close to the LA/Long Beach port complex.
“What we’ve seen in real time will be which many inventories are starting to be pulled forward,” said Gene Seroka, executive director of the Port of Los Angeles, the busiest container port in North America. “Our July numbers were off the charts. The cargo will be flying at us right now.”
On Wednesday, the Port of LA reported container volumes for the month of July rose 4.6 percent compared which has a year ago. July loaded imports rose by 5 percent as well as also exports increased by 8.4 percent. The port hailed the total monthly volumes as the “busiest July in its history.”
The adjacent Port of Long Beach, meantime, said last week the item will be on track to have “its busiest year ever” nevertheless indicated July volumes were down 4 percent due to “container shipping alliances’ decision to shift vessel deployment as well as also port calls.”
Together, the twin Los Angeles/Long Beach port complex handles about 40 percent of the nation’s containerized import trade with China. Seroka estimates at least 1 in 5 containers flowing through the complex could be affected by tariffs.
According to Seroka, importers are bringing in goods coming from China at a “much, much quicker” pace to get ahead of any potential trade impacts. He said which trend applies to goods for the back-to-school, fall fashion as well as also year-end holiday seasons.
Industry executives say the products coming in quicker include everything coming from apparel as well as also footwear to toys, electronics as well as also furniture. There’s also been movement of consumer goods earlier than normal for the spring fashion season.
“We’ve heard coming from some members which are moving up shipments to try as well as also avoid getting hit with tariffs,” said Jonathan Gold, vice president of supply chain as well as also customs policy at the National Retail Federation, which represents big-box retailers as well as also smaller merchants. “There’s a lot of uncertainty exactly when the next round of tariffs … will take effect.”
Gold added which the expectation will be which the U.S.-China trade spat could escalate. Retailers “are trying to get a little bit ahead of the game as well as also trying to make sure they have product here which doesn’t get hit with the tariff,” he said.
Retailers are spending “a lot of money to push up the delivery dates for the products as well as also find space on vessels to get here in time or to find air space or to find the warehouse space,” said Gold. “Those are all added costs which folks are going through right right now.”
Last week, the Trump administration announced tariffs on $16 billion in Chinese imports to the U.S., part of an escalating trade war with Beijing which followed an earlier round of tariffs effective July 6 to $36 billion in imports. The brand-new tariffs are set to start getting collected Aug. 23. President Donald Trump also has threatened 10 percent tariffs on one more $0 billion worth of Chinese merchandise, including consumer goods.
“The president has threatened to put tariffs on pretty much everything coming out of China,” said Gold. Retailers “are looking at their supply chains as well as also trying to plan appropriately. the item’s a mix of consumer products as well as inputs to production which are also affected by the tariffs.”
However, bringing goods in sooner at the LA port complex has added to demand for warehouse space in Southern California to store some of those consumer products.
“Warehouse space will be starting to dry up,” said Gold. “to ensure’s obviously causing concerns about when you bring the item in early, where do you put the item as well as also how you store the item.”
Kurt Strasmann, executive managing director of CBRE’s Orange County as well as also Inland Empire operations, said Southern California for many years has been “one of the most sought-after industrial markets, not only from the nation nevertheless from the entire world. the item’s genuinely big, the item’s genuinely deep as well as also the item’s genuinely diverse as well as also never was overbuilt.”
Strasmann said even during the Great Recession, the vacancy rate from the Southern California warehouse industrial market never reached above 5 percent.
“the item’s always been a fairly tight market,” the real estate executive said. “You’ve seen double-digit rent growth over the last couple of years.”
High land costs as well as also some restrictions on building also have made the item difficult to build brand-new space closer to the ports in most sought-after industrial warehouse markets such as LA as well as also Orange County.
“The deeply embedded as well as also worsening supply-demand imbalance combined with an inability to boost supply continues to be the key driver of historically low vacancy within the ‘infill’ [urban] Southern California industrial markets,” said Michael Frankel, co-CEO of Rexford Industrial Realty, a REIT focused on owning as well as also operating industrial properties in Southern California.
Yet there’s still land available at lower costs further east from the Inland Empire area of Riverside as well as also San Bernardino counties. Some of the e-commerce companies which located several years ago to the Inland Empire are right now looking more to the infill locations in Los Angeles to be closer to their population base therefore creating more demand in what will be already a tight market.
“We in Southern California today [have] less than 1 percent of our warehousing space available,” said Seroka. “as well as also we’ve got about 1.8 billion square feet of warehousing, which will be the largest from the entire world in any one geographic region.”
Within the Southern California region, CBRE puts the vacancy rate from the Los Angeles County at 1.1 percent as well as also Orange County at about 1.5 percent. The Inland Empire vacancy rate stands at about 3.5 percent to 4 percent, reflecting the addition of more warehouse space.
The vacancy rate from the South Bay — a location closest to the LA/Long Beach port complex — will be below 1 percent, according to Strasmann. “As the economy continues to grow, the item’s exacerbating the problem of low vacancy because there’s room for these companies to grow,” he said.
“Space in those spots closest to the ports will be incredibly tight,” said Chris Burns, senior vice president of California operations for Duke Realty. “the item’s getting a lot more difficult to find space.