How to Get More Industrial Product to the L.A. Market

There is a severe dearth of industrial supply in Los Angeles, but there are ways of getting more supply to the market. Constructing multi-story industrial facilities are one way to bring more supply to the market. These projects are already going up in other dense markets as well as overseas, and could be a perfect solution to Los Angeles’ need for more industrial product. However, the solution is bigger than simply building more space.

“Multi-story warehouses are coming,” John McMillan, vice chairman at Newmark Knight Frank, tells GlobeSt.com. They must, because we don’t have any dirt available and large redevelopment sites are extremely rare.  Multistory industrial properties are common in Asia due to a lack of land.

While multi-story industrial is a solution to the tight supply—driven by limited developable land and high construction costs—McMillan says that local governments should also support the growth of the industrial market in the city. “Not everyone can operate from the Inland Empire,” he says. “We need to work on convincing the local municipalities throughout Los Angeles County that we all benefit from industrial jobs. They should promote and welcome industrial development. Some cities do, but many don’t.”

There is growing pressure on local governments to evolve. Industrial is no longer the dirty, smoke-filled factories. Much of the industrial demand is coming from clean third-party logistics firms that deliver goods to consumers. “Until someone figures out how to teleport them, products will continue to be transported by truck, or in the case of e-commerce, a small van or even an Uber-style driver in their own car,” says McMillan. “Too many cities are “anti-truck” and assume every new industrial building is going to get occupied by a tenant with an abnormally high amount of truck traffic. Thus they deny new industrial developments, or put such limiting handcuffs on them, such as use restrictions, hours of operation limits, etc. that no one wants to build them.”

Likewise, McMillan says the local governments should support manufacturing companies, which contribute to jobs and economic growth. “There are plenty of fantastic manufacturing firms that have absorbed brand new industrial buildings, and created lots of great job opportunities in Los Angeles in just the last few years, such as Popcornopolis, Fashion Nova, Millenium Products, Hain Celestial and dozens of others,” he explains. “And, of course, there’s Amazon and other e-commerce companies and retailers who tend to be very big employers. Cities need to know that ‘if you build it, they will come.’ Build-to-suits are extremely rare in Los Angeles, outside of the food industry, so you can’t dictate who that end occupant is going to be and if you put too many restrictions on the project, no developer or capital source will want to spec it.  Bottom line—no new industrial buildings, no industrial job growth.”