If necessity is the mother of all invention, then disruption is the mother of all resilience. And cargo logistics is the poster child.
Despite a host of challenges—geopolitical tensions, shifting tariff policies, inflation concerns and persistent uncertainty in global markets—cargo keeps humming along. But it’s been able to respond in this way because supply chains have adapted surprisingly well to current disruptions.
“Cargo demand is resilient despite everything happening in the world right now,” said Gene Seroka, executive director of the Port of Los Angeles in a chat with Prologis CEO Dan Letter during the port’s June media briefing.
The Port of Los Angeles processed 840,000 TEUs in May, making it one of the strongest months outside the pandemic-era cargo surge. Imports reached 450,000 loaded containers, up 26% from a year ago and slightly above the port’s five-year average. Year-to-date volume now exceeds 4.1 million TEUs, putting the port on track for another exceptional year.
“That increase tells us companies continue to move product through the supply chain at a healthy pace—consumers are spending, businesses are ordering goods, and manufacturers continue to bring in parts and components—all despite the uncertainty we’re seeing across the global economy,” said Seroka.
Many importers also appear to be taking advantage of periods of relative stability to “speed cargo through the supply chain while conditions allow.”
And while the Port of LA expects June import volumes to exceed 900,000 TEUs, signaling continued momentum heading into the traditional peak shipping season, exports remain a concern.
The port handled 108,000 export containers in May, down 10% year-over-year and 8% below the port’s five-year average. Weakness is particularly apparent in agriculture and other export-dependent sectors, noted Seroka, where U.S. producers—“real people, farmers, producers and businesses”—are working hard to compete in a difficult global environment..
A Supply Chain Built for Uncertainty
For Prologis, which owns 1.3 billion square feet of logistics real estate across 20 countries, uncertainty has become a permanent feature of doing business, and driving resilience.
Letter said supply chain operators have spent years adapting to disruptions ranging from tariffs and trade disputes to wars, elections and economic volatility. As a result, many companies have fundamentally changed how they manage risk.
Rather than waiting for conditions to stabilize, companies are investing in flexibility. “Where you see that uncertainty, that’s where you need more logistic space—more warehouses in the waypoints in the supply chain,” he said.
As a result, Prologis has broken leasing records in four of the last six quarters, including 64 million square feet leased during the first quarter alone.
E-commerce is a huge driver of leases as well—online retail requires approximately three times more warehouse space than traditional brick-and-mortar retail because “fulfillment activities are concentrated in distribution centers rather than storefronts,” said Letter. And with consumers demanding faster delivery and greater product availability, warehouse demand remains robust even amid modest retail growth overall.
The Power Challenge
Supply chains falter without power. While warehouse demand remains strong, power is a growing challenge for the logistics industry, especially as data centers grow in numbers.
For years, labor availability topped the list of concerns among warehouse operators and logistics companies, said Letter. Today, power infrastructure is increasingly a concern.
“It used to be labor, labor, labor, but now we hear it’s labor, labor, power—and sometimes power, power, labor,” he said.
The rapid growth of data centers, electric vehicle fleets and automation technologies is creating new demands on local electrical grids, especially if they rely on municipalities.
As a result, companies are increasingly exploring alternative energy solutions. Prologis currently generates 1.3 gigawatts of power through solar installations (“with only 8% of roofs covered so far”) across its portfolio and is investing heavily in on-site energy generation and storage systems.
“We did it right here in the South Bay for an electrical vehicle charging hub, and we’ve energized a number of buildings in Europe and the U.S. with off-grid solutions,” said Letter. “We’re really leaning into building that business up because it’s going to be more and more important, not just for data centers, but for our core business—logistics users.
As data centers also compete for available land, they have the potential to drive up rents for warehouses. But Prologis, with its “14,000 acre, curated land bank” still cites power as the biggest concern.
Port Expansions and Nearshoring
The Ports of Los Angeles and Long Beach are expanding to handle more cargo, but it is unclear whether enough warehouses and distribution facilities will be built to support that growth. However, Letter stated that since the Southern California logistics market doesn’t rely solely on port activity, increased port capacity is only one factor.
About 75% of the region’s warehouse space is used to serve consumers and businesses, while only 20% to 25% is directly connected to port operations.
“I think Southern California has plenty of space right now for growth as you go out into the Inland Empire and otherwise, but it’s such an important market,” Letter said. “The key challenge will be continuing to modernize aging facilities and incrementally add efficient logistics space where possible.”
Regarding how shifting global supply chain strategies are affecting industrial real estate demand, particularly around nearshoring and friendshoring, particularly in Mexico, Letter also pointed to resilience.
“Customers have been adapting their supply chains for the past seven to eight years,” he said, driving meaningful warehouse growth across both the U.S. and Mexico, despite some companies diversifying production into Southeast Asia. Many Mexican markets “have been on fire,” driven by manufacturers relocating production closer to North American consumers and by limited availability of industrial land to develop.
Looking Ahead
The outlook for the remainder of the year remains cautiously optimistic, despite supply chains running best amid times of certainty. Some current cargo strength may represent shipments pulled forward ahead of potential policy changes or tariff deadlines, namely 10% global tariff under Section 122 that is set to expire on July 24.
The Port Optimizer signal, which tracks imports headed to LA, is projecting a strong June, and Seroka expects to surpass 900,000 container units for the month.
However, Seroka is bullish that as consumer spending continues, manufacturers are replenishing inventories and businesses are finding ways to navigate uncertainty. Plastics also remain an issue as inputs originate in the Middle East, so there’s incentive to “load up on some of these inputs and get ahead of it.”
Even as importers front load, Seroka said there’s opportunity for imports to remain strong throughout the balance of the year. “Who knows? We may even get a pop of cargo on the import side closer to the holidays when it comes to fashion and consumer goods,” he said.
