The need for inventory space, more data centers and the ability to be flexible in a changing industry and world are among main priorities facing U.S. commerce in today’s climate according to Dan Letter, CEO of Prologis, a real estate investment trust headquartered in San Francisco that invests in logistics facilities.
Letter, whose global company invests in logistics facilities, joined Port of L.A. Executive Director Gene Seroka on Tuesday, June 16, for the latter’s monthly media briefing. The two discussed the challenges of what is an evolving industry amid a decade of challenges that have ranged from a pandemic to wars, along with widespread technical, environmental, political and economic change.
Keeping a focus on its customers, Letter said, adaptations have come come quickly in recent years.
“Our customers are feeding us real-time information,” Letter said. “(They are) now used to working in a world of uncertainty.”
From the first tariffs in 2017, “customers really started adapting so we are seeing a lot of adaptation and resilience being built into the supply chains,” he said. “They are used to dealing with whatever comes next.”
Growing e-commerce, Letter said, is among the primary focuses as customers continue to buy products online and expect not only a wide selection but also quick turn-around deliveries.
“Compared to brick-and-mortar (stores),” he said, “that customer needs three times the space in warehouses.”
Many of those warehouses locally are finding that room in the Inland Valley.
Regulation, Letter said, continues to be an issue for building those spaces, which also demand more access to power that can be most efficiently housed in data centers.
But when it comes to warehouse and needed data center space, Letter said, Southern California is challenging.
“Finding places next to the port right now is very, very challenging,” he said.
Asked about the early June-July “peak” shipping season anticipated this year, Letter said customers are responding by leasing space while also looking ahead at least five years in order to be ready for surges.
“In July, we’re estimating more than 900,000 container units and that’s a strong number historically for us,” Seroka said. “The consumer continues to buy even in the face of higher inflation.”
But uncertainty remains, Seroka said, noting that discussions ongoing between the U.S. and Iran amid recent hostilities are being watched closely.
Companies are also weathering tariff costs and looking for windows of “stability,” Seroka said, taking advantage of those periods to speed cargo out.
The situation surrounding the Strait of Hormuz — which sees the transit of 20% of the world’s energy production — remains unclear, Seroka said, but could cause oil prices to decline if a resolution there is reached.
But, he added, caution remains.
“This (U.S.-Iran) MOU that has been reported widely is a framework, not a final agreement, with negotiations to continue over the next 60 days,” Seroka said. “And shipping lines haven’t indicated they’ll move quickly, crew safety (assurances) are primary. You definitely don’t want to be first in line. It will take months to normalize schedules and clear backlogs.”
There also remains a “war-torn environment across a vast stretch of the Mideast,” Seroka said.
If the movement downward in oil prices — which have dropped some in recent days — continues, he said, “we possibly will see a little bit of relief at the pump.”
Looking ahead, Seroka said, the tariff outlook also remains unclear as the nation heads into July. For shipping, he said, “planning horizons have gotten a lot shorter, companies are locking in costs when they can.”