Record Cargo Volumes

In 2024, the Port of Los Angeles achieved remarkable progress by processing a record 10.2 million TEUs (Twenty-foot Equivalent Units), marking it as the second-largest annual volume in the port’s history. This figure shows a significant 20% increase compared to the previous year, illustrating the port’s crucial role in global trade.

Economic Concerns Amid Tariff Strains

As of May, port experts anticipate a downturn in shipping activity due to significant tariffs imposed by the Trump administration, particularly a 145% levy on Chinese imports. This increase has already led to a noted decrease in shipping volumes, with predictions of a 25% drop in the number of vessels and an overall trade decline of up to 33%.

Gene Seroka, the Director of the Port of L.A., emphasized the repercussions on the U.S. economy, highlighting concerns voiced by Apollo Global Management about empty shelves, layoffs in trucking and retail sectors, and potential recession within months.

Impacts on Southern California’s Warehousing

The regional economy, particularly through its industrial warehouses, grapples with the ramifications of these tariffs. Shipping and logistics significantly contribute to the Greater L.A. region, accounting for approximately 13% of its GDP and generating around $93.3 billion in tax revenue. With over 2,000 foreign-owned firms operating in this sector, any disruptions in trade could profoundly influence the local economy.

The substantial 2 billion square feet of industrial real estate in the area places this region at risk of long-term economic disruption, particularly following a notable decline in stock prices for companies like Prologis after tariff announcements.

Market Strategies and Tenant Decisions

Despite the potential crisis, owners and operators of industrial real estate remain cautious rather than panicked. The demand for logistics real estate in Southern California largely stems from local distribution needs, insulating the sector somewhat from instantaneous economic swings.

Yet, uncertainty prevails as tenants reassess their strategies in light of tariff impacts. Jeff Jennison, CEO of Watson Land Company, reported a slowdown in decision-making among industrial users, while David Fan, senior research director at JLL, noted that major capital decisions have been postponed.

Future Projections and Preparedness

The duration of these tariffs will influence various segments of the warehouse market. Big retailers with complex logistics, like Walmart, may quickly adapt by resizing their real estate needs if economic conditions do not improve. Conversely, smaller firms focused on domestic manufacturing may find themselves in a stronger position.

Many businesses have been proactive in preparing for potential supply chain disruptions. Notably, Chinese logistics firms, such as Alibaba and JD.com, have engaged in extensive leasing activities to mitigate future challenges, which constituted over half of the leasing activity in the port area during late 2024.

Market Resilience in Light of Challenges

The Greater Los Angeles region faced challenges following an overbuilt warehouse market in 2023, which drove vacancy rates down significantly. However, early 2025 data suggests a bounce back, with leasing activity up by 62.5% compared to the prior year. This adaptation reflects a shift towards more reliable supply chains post-COVID, whereby businesses are prioritizing resilience over just-in-time strategies.

“COVID made these businesses realize that customer acquisition cost is hugely important,” remarked Brett Turner of BKM Capital Partners, stressing the need for companies to maintain robust supply chains.

Conclusion: Navigating Uncertainty

The logistics sector’s resilience will be tested as tariffs and economic uncertainties continue to influence shipping and warehousing dynamics. Overall, while immediate impacts may manifest through reduced demand and increasing vacancies, strategic adjustments can foster recovery and better prepare the industry for future challenges. Economic activity remains a sensitive barometer, particularly in light of the increasing tariffs.