It’s hard to overstate the critical importance of the twin ports of Los Angeles and Long Beach, Calif., to the U.S. economy and global trade, including of course eCommerce. Serving as key gateways for products coming in from Asia, they account for about 40% of all imports.
Of this, China historically has accounted for about 50% of total volume, subject to fluctuations in trade agreements and geopolitical factors. There has been rising tension over restrictions on exporting technology to China for national security reasons, especially semiconductors and AI-related products.
Japan, South Korea, Taiwan, and Vietnam each contribute between single digits and 10%–15% of cargo to the ports of Los Angeles and Long Beach, depending on the types of goods and trade dynamics at different times of the year.
Because these twin ports handle so much trade volume, it’s important for shippers or their logistics provider to have a presence nearby. This helps facilitate the logistics of Los Angeles fulfillment, by tapping the power of a local warehouse.
While disruptions to West Coast port traffic are not unknown, and there is competition with East and Gulf Coast ports, Los Angeles and Long Beach remain vital conduits for the flow of goods. For this reason, the so-called Inland Empire east of Los Angeles has become a major concentration of warehouses, fulfillment centers, and logistics assets. Goods arriving through the ports are short-hauled there to be staged for distribution throughout the country.
Both Los Angeles and Long Beach have deep-water ports that can accommodate the largest cargo vessels in the world, with twice the capacity of the Ports of New York and New Jersey. They offer access to a vast array of shipping lines, state-of-the-art cargo handling facilities, and advanced intermodal systems for efficient cargo transfer. This connects them to a vast logistics system designed to deliver freight using various transportation modes to population centers across the country.
The ports of Los Angeles and Long Beach handle about 20 million twenty-foot equivalent (TEU) containers per year, a figure that fluctuates with various supply chain, trade and economic factors. Combined, they are the ninth busiest seaport in the world, after Shanghai, Singapore, Shenzhen (China), Ningbo (China), Busan (South Korea), Hong Kong, Guangzhou (China), and Qingdao (China).
The top import categories into Los Angeles are furniture, auto parts, apparel, plastics, and footwear; for Long Beach fulfillment, it’s furniture, apparel, electronics, auto parts, toys, and sporting goods.
In January 2024, cargo volumes were up 18% at the Port of Los Angeles, and 17.5% at the Port of Long Beach, over 2023 figures. This was driven mainly by retailers busy stocking up on inventory ahead of the 10-day Chinese New Year shutdown.
The ports of Los Angeles and Long Beach are ideal for facilitating eCommerce, given their status as a major gateway to Asia, as well as their vast logistics infrastructure and connections to transportation networks
The current contract between the United States Maritime Alliance (USMX), which represents owners of 36 East and Gulf Coast ports, and the International Longshoremen’s Association (ILA), which represents 70,000 dockworkers, expires on Sept. 30.
Uncertainty over the outcome is impacting negotiations between shippers and ocean carriers, as they consider how much volume to allocate to each coast ahead of the busy fourth quarter.
When vetting potential 3PL partnerships, eCommerce companies should put those with Los Angeles fulfillment operations on their shortlist. Competitive advantages include the ability to quickly unload, process, store and distribute orders, significantly reducing transit times to customers. In addition to shorter lead times, lower transportation costs also equate to lower carbon emissions.
For inventory being stored in bulk, the ability to utilize facilities near the ports cuts costs by reducing reliance on long-haul transportation. Direct access to major shipping lanes and intermodal transportation also improves supply chain efficiency. It also enables faster restocking and better inventory management through quicker turnaround times. This reduces the need for excessive stock levels and associated carrying costs while increasing operational flexibility.
For eCommerce companies looking to take a DIY approach to setting up a Los Angeles fulfillment operation, there’s quite a bit involved. We’ll walk through the steps.
Los Angeles and Orange counties have very low warehouse vacancy rates, often below 2%. High demand for space near the ports for logistics, distribution, and eCommerce fulfillment has driven up costs and made leasing very competitive. New development is constrained by limited space and regulatory hurdles, making it challenging to add significant capacity.
The Inland Empire offers somewhat more availability, but high demand has similarly impacted vacancy rates. It has attracted many retailers and developers who put up large facilities in excess of 500,000 or even 1 million square feet, and offers more favorable lease terms than areas closer to the ports.
Future availability in these markets will depend on the pace of new construction, changes in demand, and changing supply chain strategies. To mitigate risk, there is a trend toward nearshoring or reshoring suppliers and logistics.
Given the tight availability of space near the twin ports, the buy or build options are likely very limited and expensive. As a rough yardstick from one builder, the average cost of constructing a warehouse in the U.S. in 2023 ranged from $750,000 to $1 million for a smaller facility in the range of 50,000–60,000 square feet. Of course, that figure could be considerably more in a high-demand area like Southern California.
The average cost in Los Angeles last year to purchase an existing warehouse was $214.56 per square foot, which would put the price tag for a 50,000-60,000-square-foot facility between $10.7 million and $12.9 million. The median price was $309.34 per square foot, which would bump up the total to $15.5 million—$18.6 million. Then you have to factor in things like earthquake insurance with the San Andreas fault, with an average cost of $3.54 for every $1,000 in coverage.
As of Q4 2023, the vacancy rate for industrial property in greater Los Angeles (Ventura and Los Angeles counties) was just 2.1%, according to figures from commercial real estate brokerage CBRE. Space was even tighter in nearby Orange County, at just 1.2%. In the Inland Empire, which encompasses most of Riverside and San Bernardino counties, vacancy rates were somewhat better, at 5.2%.
Per CBRE, the triple-net lease rate per square foot of /industrial property in Los Angeles County in Q4 was $1.52, up slightly from the previous quarter. That equates to an annual cost of $380,000 for a standard 250,000-square-foot distribution center.
And the build, buy or lease options don’t even factor in the many logistical complexities and high high operating costs of running a warehouse or distribution center in this region. This includes stricter environmental regulations than the rest of the country, including a massive EV push and responsibility for third-party emissions from carriers accessing your property. This latter movement is spreading to other states including Illinois and New York.
Because of these high costs for build/buy or lease, plus the challenges of regulatory compliance, the most attractive option for SMB eCommerce companies is partnering with an experienced 3PL.
In addition to the advantages cited above of close proximity to Los Angeles and Long Beach, an experienced 3PL provider will have the physical network and carrier connections to efficiently fulfill orders nationwide. This includes the ability to take advantage of volume pricing and select the optimal carrier, route, and mode for each shipment.
From local storage to rapid fulfillment leveraging automated systems and a flexible, scalable model, a 3PL can design a plan that best accommodates your specific business requirements. This includes the ability to offer discounted two-day and next-day shipping, in line with heightened customer expectations from Amazon Prime.
With an intimate knowledge of the intricacies of eCommerce fulfillment in southern California, a qualified 3PL based there is equipped to overcome specific logistical challenges native to the area.
This includes the ability to quickly react to disruptive events, such as supply chain backlogs, port congestion and dock worker labor disputes. For instance, they work closely with freight carriers to reroute shipments to other West Coast ports or even to East and Gulf coasts in extreme situations.
A 3PL will also handle compliance with all the latest California regulations impacting logistics operations, the strictest in the nation. In addition to environmental standards, these include labor requirements (wages, working conditions, production quotas, etc.), packaging and recycling standards, trucking and freight regulations, and customer data privacy standards.
There are a number of advantages of having your eCommerce fulfillment operations located near the main ports of Los Angeles and Long Beach. They include access to a vast logistics network, the ability to save on transportation costs and to improve inventory management efficiency. But the build, buy and lease options are expensive as space is in high demand and the requirements are numerous.
ShipBots, an innovative 3PL with eCommerce experience across industries that delivers results, has its main fulfillment center in Gardena, Calif., just miles from the port of Los Angeles. Facilities in the Midwest and East Coast enable fast, cost-efficient delivery anywhere in the country. With easy integration into all major eCommerce platforms (Amazon, Walmart, Shopify, TikTok Shop, BigCommerce, eBay) and fast product store onboarding, ShipBots has the technology, team, and resources to grow with your business. Get a free quote today!
