A Market on Fire: Development Opportunities & Challenges

By Dennis Kaiser

Connect Inland Empire brought together more than 300 commercial real estate professionals in Chino for a full afternoon of CRE conversations and networking. Three deep-dive panel discussions featured some of the region’s top CRE leaders who shared insights on trends shaping the market.

The ‘development opportunities and challenges’ panel dove into a robust discussion on what type of facilities are being developed and redeveloped, what amenities are in demand by tenants, as well as how e-commerce is shaping the market. The markets most active developers shared how they are shaping their pipelines, and the opportunities and challenges they face.

Allen Matkins’ John Condas notes the Inland Empire industrial market is “still booming,” though still must manage the threat of CEQA. The challenge he says, is often educating cities and communities on the economic benefits of logistics facilities. Developers have come to understand the “challenges” they face from opponents, so they know what “CEQA bounty hunters” want. That’s led developers to set accurate budgets and allocate time to settle challenges. The reality is that the unions have helped to drive up project costs 7% to 18%.

Stirling Development’s Brian Parno notes the shift to e-fulfillment has started to affect second and third generation buildings, especially those sites with maximum coverage. They may not be able to meet the new parking requirements, since they were not designed to accommodate so many workers.

Prologis’ Damon Austin notes it would behoove industrial developers to band together in a “collective group” to address the CEQA threats, yet most elect to retain a single focus on their respective projects to “get the project out of the ground.” He says, the “key is getting deals done and done quickly,” which tends to favor settling with those who oppose a development rather than fighting them in court.

One interesting development trend Austin is seeing is the continued expansion of clear heights. He doesn’t believe the growth is done, and tenants are now seeking 60-foot or 70-foot clear heights to accommodate mezzanines. He’s even heard of a 130-foot clear height building concept that was fully automated.

Trammell Crow Company’s David Drake points out that over the last four years the major change in the marketplace has been the influx of e-commerce operations. Amazon has driven the market, and other companies will continue to use them as a model for their facilities, he notes. Drake says an intense focus on community outreach has resulted in the company’s projects being well-received by the community.

For comments, questions or concerns, please contact Dennis Kaiser