For Inland Empire Industrial Features, The Skies the Limit
Industrial users in the Inland Empire are looking for large floor-plates and 40-foot clear heights.
“The model for Class-A distribution is constantly changing. Only a few short years ago the industry was moving from 32-foot clear height to 36-foot clear in these larger buildings; now we are looking at 40-foot clear or greater,” Jason Krotts, a principal at REDA, tells GlobeSt.com. “As we design these facilities, we take the approach of a long-term owners perspective. The intention is to try to forecast where design changes are occurring and implement these changes to capture as much of the market as possible. Tenants seem to be taking more advantage of the overall cubic volume of these facilities and the racking and fire systems are changing. More and more users are putting in material handling systems, which are starting to change how these buildings are designed.”
Developer REDA has broken ground on the Ontario Ranch Logistics Center, a new 2.6 million-square-foot industrial facility in Ontario with the intention of bringing a best-in-class asset to market to fill this demand. “Our vision when designing the project was to create a Best-in-Class logistics park ,which would be used by one user in a campus-like setting or split up and occupied by multiple users,” says Krotts. “Approximately 56% of tenant demand in this industry is from third party logistics providers and/or e-commerce users. While we aren’t necessarily targeting a specific user, we tried to design the project to be utilized by a wide range of user groups. We have had some strong preliminary interest from users, which would be classified within those two categories.” REDA has partnered with Clarion Partners to develop the project, which is set to deliver in December 2019.
Third-party logistics catalyzed the demand for larger floor plates in the Inland Empire this cycle, but consolidation has helped to create new demand for big box spaces, like this. “There has been a fair amount of consolidation over the years from users disposing of the multiple distribution facility model and moving to single larger fulfillment centers,” says Krotts. “There are more efficiencies in occupying a larger footprint and clear-height which provide greater cubic volume allowing them to drive down their occupancy costs.”
Ontario specifically has become a target market for this higher end industrial product to come to market. “The City of Ontario’s City Council and staff do a great job of aiming to provide an equal work / life balance for residents as well as corporations within the city,” adds Krotts. “The proximity to the ports of Los Angeles and Long Beach, Southern California consumer base, corporate housing, access to labor force and availability of larger land sites allow for an excellent submarket for development.”
The Inland Empire has become known for big box industrial demand and best-in-class industrial developments. While there has been a significant amount of development in the market this cycle, Krotts says that there is room to grow. “Obviously as a developer or investor there is always concern with the supply side of the market,” he says. “However, when you look directly at e-commerce as a market disrupter there seems to be a fair amount of room to grow. Per CBRE, of all 2018 transactions between the greater LA, Orange County and the Inland Empire, approximately 12.2% of the transactions were e-commerce, and this equates to approximately 40% of the total square feet leased in 2018. Domestically, Amazon is the clear leader in online sales and distribution. However, globally, Amazon only has about 13% market share. It is estimated by 2020 the U.S. will sell approximately $486 billion of goods to the world in cross boarder e-commerce. The cross boarder growth coupled with the domestic growth could require upwards of 190 million square feet of additional industrial building demand.”