Almost as if preparing for the imminent holiday season, there were 89 industrial projects under construction in the Inland Empire during Q3, totaling 20.5 million square feet, according to a release from a representative of Avison Young (AY). The firm’s research shows that 34 buildings, totaling 8.34 million square feet, were delivered in the quarter, and nearly half of these were 150,000 square feet or larger — with another 40 buildings of this size under construction.
The statement says holiday shopping season can make or break many retailers and they realize the importance of planning for their distribution needs 12 to 18 months ahead of the holidays, according to Cody Lerner, a senior associate with AY’s Inland Empire office. Lerner says retailers are actively preparing year-round for the “what ifs.”
“Large distribution users that are relying on revenue from holiday shopping implement emergency systems and back-up plans in case their freight is late, the goods are not delivered, or there are issues with port or truck traffic,” Lerner says in the release. “They don’t want to be caught without a Plan B and miss out on any revenue from this critical shopping period.”
The Inland Empire industrial market continues to exhibit robust fundamentals, supporting the rapidly growing warehousing and logistics demands of the entire Southern California region, AY reports. The largest industrial project under construction at Q3 was Watson Industrial Park, consisting of three LEED buildings located in Chino, south of the Ontario Airport Area. The project adds 1.43 million square feet of new inventory, 43 percent of which is pre-committed to tenants.
The next largest project in the market, according to AY, is the 1.35 million-square-foot Big Lots Distribution Center in Apple Valley, south of the existing Walmart Distribution Center, expected to complete construction mid-2019. Apple Valley is part of an expanding area surrounding the Southern California Logistics Airport in the High Desert emerging as an affordable option for supply-chain growth, AY says.
AY also reports that Amazon, which captures more than 40 percent of ongoing online sales, has more than 140 million of industrial space in varying sizes across the U.S., and by 2022, that space is expected to increase to 280 million square feet, including Whole Foods facilities, according to CoStar. “With approximately 40 percent of total retail sales being completed online, retailers have shifted their space needs to include more distribution and fulfillment space and less bricks and mortar,” the release says. “Many retailers have three times as much industrial space as retail space, which has created significant demand in the industrial sector.”
The Inland Empire is one of the top U.S. markets for growth in distribution and fulfillment space due to its proximity to major urban areas and central location that provides access to a wide distribution radius, AY says.