Labor’s Conspicuous Impact on Inland Empire Industrial Markets

Connect Inland Empire coming up Tuesday, November 12th. You can get more information and register to join us on this link.

By Dennis Kaiser

Wortmann

SoCal’s thriving industrial market shows no signs of a let-up, with logistics and last mile warehouse operators continuing to have a voracious appetite for facilities. The e-commerce boom and investment activity are combining to drive the race for space. It is all adding up to continued runway for the sector.

Yet, there is one factor that is presenting challenges, that being labor. Unemployment reached a 50-year low in September at 3.5%, according to the Bureau of Labor Statistics. The historic low unemployment rate is creating a situation that JLL’s Sharon Wortmann, senior vice president, says is top of mind.

“Labor is often one of the first topics discussed with our industrial user clients,” Wortmann says. “Drayage and distance from the Port is still a major consideration; however, when there is such a low unemployment market, labor becomes a first topic of conversation.”

That is driving companies to make adjustments to business models by increasing productivity, which is reflected in investments in automation and data processing. Wortmann says, “The equipment value inside the box sometimes exceeds the value of the building!”

Further, industrial users are constantly seeking cost reductions by aid of technology, a critical role in efficiency, with advances in Artificial Intelligence (AI) autonomy and robotics, which all translates to labor retention. “Companies are highly focused on employee retainage, which does not fully get translated through the low unemployment rate,” says Wortmann. “Retraining or what some refer to as “re-skilling” by taking workers from repetitive positions to higher skilled, higher technology roles not only makes these employees happier, but they recognize the company investment and are more likely to stay in their position.”

Wortmann adds that select companies have rolled out “Academies” that are keenly focused on training and retainage; thereby addressing the low unemployment environment.

To put the current labor vs. demand situation in perspective, JLL research showed 27 million square feet of absorption occurred in 2018, and there was available labor to fill those Inland Empire warehouses. But that may be a challenge to match this year from a labor perspective. Wortmann says, “2019 appears to be on track for a similar absorption figure. Essentially, supply chains and industrial users have to be in the largest industrial market in the nation, as 40% of U.S. imports from Asia come into the L.A./Long Beach Ports, which also represents 70% of the west coast Asia imports. The L.A. Basin is critical to a large number of industrial users’ supply chain. They simply have to have a presence in this market.”

Connect Industrial is coming up on November 19th in Houston. You can get more details and register to attend on this link.

For comments, questions or concerns, please contact Dennis Kaiser