Lawmakers Approve Measure Aimed at Limiting Locations of New Inland Empire Industrial Buildings

The latest effort to rein in what critics see as the creep of warehouse development near residential areas around the country took a step forward in California, where state legislators are seeking to clamp down on one of the nation’s biggest centers of industrial property growth.

The California Assembly voted to advance legislation that would require developers to build warehouses at least 1,000 feet from houses, apartments and other “sensitive uses” in Riverside and San Bernardino counties, an area of Southern California known as the Inland Empire that has one of the largest concentrations of logistics space in the United States.

The growth has pushed warehouses closer to neighborhoods, raising concerns from community activists about diesel truck traffic and pollution. Those complaints have played out beyond California, where the debate over the bill provides a glimpse of the broader themes in similar discussions around the country.

Debates about warehouse expansion have led to legislative efforts to curb development in Southern California and New Jersey, two of the most desirable areas of the country for industrial development because of proximity to the most populous U.S. cities, New York City and Los Angeles. Logistics construction has dramatically expanded in both states, as well as in distribution hubs such as Chicago and Dallas-Fort Worth, to meet rising demand for e-commerce delivery during the pandemic.

The tug of war playing out around the country between those seeking restrictions and those trying to boost economic development through industrial property was reflected in legislative maneuvering in the statehouse of the nation’s most populous state. California’s Assembly passed Assembly Bill 2840 41-24 late Thursday after its author, San Bernardino Democrat Eloise Gómez Reyes, accepted changes scaling back the statewide measure to include only the Inland Empire.

Developers are building 40 million square feet of logistics and other industrial facilities in the Inland Empire as its population and job base has grown at one of the nation’s fastest rates over the past decade. The region has added more than 18 million square feet of space in the past year alone, boosting the total warehouse supply by 2.7% to almost 710 million square feet, according to CoStar data.

‘Job Killer’

The commercial real estate industry and business groups such as the California Chamber of Commerce have vehemently opposed the bill, branding it a “job killer” that will put the brakes on the Golden State’s booming logistics industry.

Reyes said that while the logistics sector fills a critical need by ensuring the movement of goods across the state, warehouses “should be good neighbors” in their communities. She noted that as early as 2005, the California Air Resources Board recommended a “buffer zone” between residential areas and warehouses to minimize the effects of diesel traffic and emissions.

“In my district and across the state, warehouses are being built right next to homes and schools,” Reyes told colleagues on the Assembly floor Thursday. “I believe it is time to establish reasonable standards to protect communities while at the same time allowing commerce to florish.”

The change that scales back AB 2840’s application from statewide to only San Bernardino and Riverside countries don’t satisfy Timothy Jemal, CEO of NAIOP SoCal, the region’s largest trade association for office and industrial real estate owners and brokers. He urged legislators to kill the bill, which must be passed by the state Senate and signed by Gov. Gavin Newsom to become law.

“This is a still a bad bill,” Jemal told CoStar News in an email. “The bill would do great economic harm to state and local economies, even when singling out two counties. The Inland Empire is a critical hub for moving national goods, creating jobs and a key link to the supply chain.”

The Chamber of Commerce was likewise unswayed by the late changes.

“Despite the last minute attempts to salvage this problematic bill, AB 2840 will still exacerbate the supply chain crisis and make it harder and more expensive for Californians to purchase essential goods,” the CalChamber said in an emailed statement.