Every month when the news media reports the latest “record trade deficit,” what often goes unsaid is that this deficit means cargo handlers in Southern California are busier than ever. With the country’s ever-increasing reliance on imported materials and goods, the logistics industry appears to be thriving. But developing the warehouses and distribution centers has become an issue in many Southern California communities.
Several factors are affecting Southern California’s warehouse development scene: An almost complete absence of vacant land near the largest ports, some local governments’ unease with the low jobs-per-square-foot ratio inherent in warehousing, and rising questions about air pollution from trucks that come and go from warehouses. Thus warehouse and distribution center development continues to move farther inland, where land is available and inexpensive, and where local governments are happy to approve almost any project that brings jobs.
This move inland comes despite the total dominance of the coastal ports of entry. The Los Angeles-Long Beach port complex is the largest in the country and third largest in the world, and experts say the amount of cargo headed through the port complex will quadruple over a 25-year period. Los Angeles International Airport (LAX) handles more cargo than any other West Coast airport and, despite attempts by transportation planners to spread the wealth among other airports in the region, LAX continues to get most of the growth. By way of comparison, LAX handles about as much cargo in one week as the region’s second-busiest cargo airport, Ontario International, handles all year.
But most warehouse and distribution center development is occurring 50 or more very congested miles from the seaport and LAX. Grubb & Ellis recently reported that about 10 million square feet of industrial space was under construction in Riverside and San Bernardino counties during the second quarter of 2004. Nearly all of this space was in the form of 500,000-square-foot or larger warehouses and distribution centers.
“The place where the warehouse growth has been is the Inland Empire,” said Gary Painter, director of research at the University of Southern California’s Lusk Center for Real Estate. “It all has to do with the cost for the land.”
Currently, the cheaper land offsets the cost of transporting things — usually by truck — to the outlying warehouses, Painter said. At some point, the balance will change, he said. But determining where that balance point lies is difficult. Unless there are some “radically different trends” in ground transportation costs, the inland movement of warehouses and distribution centers will continue, he said.
However, officials in cities that have already become shipping hubs are ambivalent about further growth.
“Warehouse and distribution centers just sort of happen by themselves,” said Ray Bragg, the City of Fontana’s redevelopment and special projects director. “We’ve got three interstate freeways traversing through the city, and we’ve got Union Pacific railroad going through the south end of the city.”
Fontana provides incentives for distribution centers only if there is an additional component, such as sales or marketing. For example, an American Hotel Supply facility in Fontana serves as both a warehouse and as a sales outlet, providing the city with sales tax revenue.
“Warehouses and distribution centers, unfortunately, are not high jobs producers, and they are not what you might call ‘living-wage’ jobs producers that allow people to live in the community,” Bragg said. Furthermore, truck-dependent warehouses generate enormous road maintenance costs for local government, he said.
Neighboring Ontario has 84 million square feet of industrial space, about half of which is devoted to the logistics industry, said Mary Jane Olhasso, the city’s economic development director. The city encouraged this development by zoning large tracks of freeway-accessible farmland near the airport for industrial uses. The city also worked hard to process applications quickly.
But, even with its airport, freeways and the UP rail line, Ontario’s days of warehouse growth are about over because, Olhasso said, the city is “virtually out of space for a big box. … If I’m a real estate developer, I’m not going to look at Ontario.”
A 2002 study by airport consultants Leigh Fisher Associates found plenty of room for air cargo growth at Ontario airport. That is fine with the city, but Olhasso pointed to the fact that the number of passengers using Ontario is expected to quadruple by 2020. That passenger growth is going to boost the demand for office space, so Olhasso expects some existing distribution centers along Interstate 10 to become office buildings.
“Over the next 10 years, you’re going to see a major change in Ontario jobs and in the skyline,” Olhasso predicted.
Still, some inland localities remain enthusiastic about warehouse development, including cities along I-215 in western Riverside County and in San Bernardino County’s Victor Valley. Former military bases are also starting to get some significant projects.
Community resistance, however, is rising in places. In Moreno Valley, for example, hundreds of people have protested the Planning Commission’s approval of a three-building, 1.5-million-square-foot warehouse center next to March Air Reserve Base — even though the site has been zoned for industrial development since 1989. The City Council is tentatively scheduled to decide the controversy this month, said Moreno Valley planner Edward Robertson.
Residents’ concerns usually are focused on the noise, congestion and air pollution that comes with truck traffic. During the last two years, the Center for Community Action and Environmental Justice (CCAEJ) has successfully fought warehouses proposed for the unincorporated Riverside County town of Mira Loma, which has become a distribution center hub. Air pollution is the biggest concern. The South Coast Air Quality Management District has reported that diesel pollution — which causes cancer — is more intense in Mira Loma than anywhere else in Southern California. And researchers at USC found that children in Mira Loma have unusually low lung capacities.
“Here we had local officials developing their economic strategies around this hugely polluting industry,” said CCAEJ Executive Director Penny Newman. “It makes absolutely no sense to bring in industry that is not labor-intensive, that is more automated all the time.”
Meanwhile, the air district has begun circulating a draft of a recommended air quality element that cities and counties could incorporate into their general plans. The district suggests that cities and counties keep air polluting industries away from children, and elderly and sick people, and more seriously consider cumulative impacts.
Mary Jane Olhasso, City of Ontario, (909) 395-2010.
Ray Bragg, City of Fontana, (909) 350-7697.
Gary Painter, USC Lusk Center forReal Estate, (213) 740-8754.
Penny Newman, Center for Community Action and Environmental Justice, (909) 360-8451.