By Dennis Kaiser

Connect Inland Empire brought together more than 300 attendees in Chino for a full afternoon of CRE conversations and networking. Three deep-dive panel discussions featured some of the region’s top industry leaders who shared insights on trends shaping the market. The engaging discussions ranged from a conversation about investment prospects for the Inland Empire to the challenges facing developers to how port activity is driving the market.

Connect Media will be recapping each panel in the coming days, but here are a few key takeaways from yesterday’s conference.

Investing in IE Industrial

Investment opportunities are abundant in the Inland Empire with e-commerce and the need for fulfillment infrastructure, as well as industrial manufacturing and warehousing, driving interest. Top dealmakers and investors discussed the investment climate and how it is faring compared to the rest of the SoCal market, whether the current conditions are sustainable long-term, and what to expect for the year ahead.

CBRE’s Joe Cesta notes that in the rent versus labor conversation, today’s location decisions now involve a company’s HR representative, not just a real estate director. For some companies, “labor far outweighs rent in decisions now.”

Marcus & Millichap’s Cody Cannon notes since 2013 the Inland Empire has experienced some rather “dramatic changes” in the number of jobs, wage growth, and retail sales, all of which is driving compression in cap rates. For investors, rent growth has provided stable cash flow. That’s also created a perplexing situation. They wonder, if they sell, where would they move that capital.

City of Moreno Valley’s Mike Lee says the city has found success in attracting companies and developers by acting more like a “Nordstrom’s when it comes to their approach to customer service.”

Duke Realty’s Paul Jones notes the Inland Empire has a number of factors that remain in its favor, ranging from a large population base, ease of transportation, land constraints and barriers elsewhere. It all adds up to a “perfect recipe for real estate investors.” He adds, the “crazy asset appreciation is due to rent growth, not cap rate compression.”

Rexford Industrial’s Patrick Schlehuber says tenants are shifting to the Inland Empire because the newer modern industrial product found there tends to be a “better product than in the denser markets that are land constrained.”

A Market on Fire: Development Opportunities & Challenges

This 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 power and systems required by companies to lease space. 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 must manage the threat of CEQA. The challenge he says, is often educating cities and communities on the economic benefits of logistics facilities.

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.”

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.

Growing Tides: Ports, Logistics & the Evolution of Space

The Port of LA just hit nine million TEUs, a new record for North America and SoCal has seen a resurgence in manufacturing, filling up vacant space in the region. The logistics industry is beginning to see new technologies and information portals allowing them to gain access to new data, and at a much faster pace. Leaders discussed how port activity is driving the market, what logistics companies are doing to keep up, and the expected future challenges and opportunities.

Lee & Associates’ Jeff Rinkov says they are seeing more demand for “last mile” facilities in infill markets that are frequently landing in the 25,000-square-foot to 50,000-square-foot range.

City of Ontario’s Bradley Gates notes the city is working to meet the logistics industry’s more technical workforce requirements with programs at schools and colleges that keep the pipeline full with trained workers.

Port of Los Angeles’ Jack Hedge says the innovations introduced at the port, such as the new GE Portal and the Pier Pass system), are helping to make the entire terminal facility “more efficient” and is creating a “more transparent logistics process.”

World Class Logistics Consulting, Inc.’s Jon DeCesare says the logistics industry is growing because retailers, such as Kohl’s and Best Buy, are deferring to 3PLs to handle more and more of the tech aspects of moving goods. That’s requiring logistics companies to make significant investments in advanced technologies.

Port of Houston Authority’s Shane Williams notes Houston’s port is experiencing “organic growth” as a result of population and job growth in the state. As a result of the recent hurricane, he expects a delay of six months for the plastics sector to resume production and delivery of product.

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