How the Industrial Surge Helped Markets Recover Post Recession

The surge of industrial activity has been a staple characteristic of this cycle, but the industrial boom also helped some Southern California markets recover following the recession. The Inland Empire, specifically, has benefited immensely from the growth in industrial demand and development. In fact, the local leadership saw early on that industrial activity could help the market in its recovery, and began to partner with developers during the entitlement and construction process.

Trammell Crow Co. has been an active developer in the market throughout the cycle, recently completing 2.4 million square feet of industrial development, and has seen the evolution and the impact of the industrial boom. “We are a community developer, so we spend a lot of time in the local communities. Right when the recession was ending, it became obvious that the Inland Empire from a job creation standpoint and a tax generation standpoint would be slow to recover,” Tom Bak, senior managing director in Trammell Crow Co.’s Orange County office, tells GlobeSt.com. “They were very favorable to development, and were very accommodating in the process of entitling and developing industrial buildings. It just so coincided with the emergence of ecommerce fulfillment centers and the whole studying of the supply chain business.”

As the ecommerce effect moved through the market, it was clear that the supply chain was changing, and new., larger developments were needed to accommodate that growth. “Major corporations were looking to save money, and their supply chains were where they looked first,” explains Bak. “As a result, the building sizes have gone from 50,000 square feet to more than 500,000 square feet, and a lot of the was driven by the reconfiguration of the supply chain network.”

As a result of this development activity, the Inland Empire is one of the most sought-after industrial markets in the country. The availability of land to accommodate larger development was a crucial factor in the market’s growth; however, the city’s action also helped to fuel development activity, according to Bak. Today, land is becoming scarce in the market, and, on the investment side, few owners are willing to sell, creating high-barrier-to-entry dynamics. “It is more difficult today to find land that you can build on,” says Bak. “So, supply has been constrained as a result, and demand has been robust. When you mix those two together, it has been great. You have also seen investor appetite be very, very strong. However, very little has sold because it is so hard to develop out there. Every investor that has an allocation for industrial uses is an example of what they want to own.”