Wonderful RE’s Jason Gremillion on Industrial Parks Post-Inflation

By Joseph Rauch

Now that Connect LA is only a week away, we want to make sure you’re familiar with all of our California market panelists. We interviewed Wonderful Real Estate Senior Vice President of Development Jason Gremillion about industrial real estate prospects, the advantages of the Central Valley and more. Here are his insights:

Connect CRE: How has Wonderful Real Estate navigated the recent turbulent economic conditions?

Jason Gremillion: Fortunately, we have not experienced the effects of the recent economic conditions to the extent that other industrial developers have. One reason is that we utilize our in-house discretionary capital with no outside construction debt or partners to fund projects. This allows us to streamline our development process, from concept to finish, and deliver high-quality industrial buildings on time and as promised. 

We have also maintained a conservative growth strategy of 1–1.5MSF annually on a speculative basis and do not begin subsequent development until previous developments are leased. As a result, our Wonderful Industrial Park is 100% leased, with two new developments totaling 1.5MSF underway for delivery in Q2-2024.

Connect CRE: Wonderful’s industrial developments are in the Central Valley rather than population centers or the Inland Empire. How has that strategy worked to the company’s advantage?

Gremillion: Our Southern Central Valley location has certainly been a strong advantage to the success of the Wonderful Industrial Park (WIP). Located in Shafter, California, WIP is the geographical nexus for distribution to 11 Western states. The park is thoughtfully designed to create an extensive buffer between industrial and residential areas, directing traffic away from neighborhoods and schools, as well as offering amenities to benefit our local communities. 

One such amenity is our newly opened 40,000 square-foot Wonderful Career Center, which provides state-of-the-art classrooms, offices, and lab facilities to WIP tenants, local schools, and Wonderful Company employees, providing valuable training and skills needed for upward economic mobility. It is our mission to center Wonderful Industrial Park as a hub for the Central Valley that fosters an economic future and quality of life that is cleaner and more sustainable for generations to come.

Connect CRE: The industrial sector has had a remarkable run during the pandemic. Do you expect this trend to continue, despite the current economic headwinds?

Gremillion: I anticipate there will be a lull for the remainder of 2023 and possibly into the 2^nd quarter of 2024 as tenants, lenders, and capital pause to see how the market unfolds. Contraction in investments and acquisitions will continue as valuations decline based on increasing cap rates and projects with high land bases. 

That being said, the recent pullback in speculative development for projects dependent on construction debt and “uneasy” capital partners will have a greater impact on supply than demand. As such, I do not see rents for existing or projects currently under construction coming down significantly. 

Lastly, unresolved labor negotiations at U.S. West Coast Ports, in addition to current import/export imbalances, will continue to negatively affect the CA industrial sector. I am hopeful that the Ports and ILWU will come to an agreement this summer, allowing the return of goods recently diverted to East and Gulf seaports. If successful, I believe that our industry will fully recover by Q3-2024.

Don’t miss Connect LA on May 3 at the Hotel Indigo. Connect in person with other California CRE experts like Colliers Vice Chair Sean Fulp.