Work will kick off shortly on a sprawling 1.45 million-square-foot warehouse project in Riverside County as the Inland Empire solidifies its position as one of the country's premier distribution hubs.
New York developer Rockefeller Group will spend $110 million to build two giant buildings — one will contain 1 million square feet — in Perris that are intended for companies needing to distribute goods that arrive through the ports of Los Angeles and Long Beach.
Rockefeller doesn't have tenants yet, but figures it can secure them by the time the buildings are complete in summer 2018.
"The need for speculative development is growing rapidly because of the demand by e-commerce companies who require ultra-large facilities," said Marc Berg, regional director for Rockefeller.
The explosive growth of online commerce in recent years has fueled development of warehouses and distribution centers in the country's key industrial property markets near seaports, with the Inland Empire leading the pack, according to a new report by real estate brokerage CBRE Group Inc.
Wolverine Worldwide, for example, just signed a lease for a 720,000-square-foot distribution center under construction in Beaumont for its footwear and apparel brands such as Sperry, Hush Puppies and Wolverine, CBRE Group said.
"This new facility will allow us to cut seven days off delivery time to our consumers," Wolverine executive Jeff Gorski said.
Rockefeller's two-building complex along Interstate 215 near intersections of the 10, 15 and 60 freeways will be called Optimus Logistics Center. The location has 9.5 million residents within a 50-mile radius and is within an eight-hour drive of potential customers in Nevada, Utah, Arizona and New Mexico.
Though increasingly common, a 1-million-square-foot warehouse is still viewed as enormous — wooden warehouses built in the Inland Empire for the military during World War II were considered large at 80,000 square feet. A million-footer could hold about 20 football fields or 22 large grocery stores.
Rockefeller's bigger building will be so vast at 1,381 feet by 730 feet that contractors laying the concrete floors are expected to use lasers to gently follow the curve of the earth and keep the floor level. Together the two Rockefeller buildings will have enough loading bays to service 232 trucks at the same time.
From 2010 through 2016, 13 mega warehouses containing 1 million feet or more were built in the Inland Empire, CBRE said.
All together about 422.5 million square feet of warehouse space was built in the U.S. in that time frame, most of it in the 10 largest hub markets, led by the Inland Empire, Dallas-Forth Worth and Chicago. The big hubs are the backbone of international trade, which has increased 600% since 1980 as a growing amount of of raw materials and finished products are shipped across the seas.
Rumblings of potential policy conflicts between the Trump administration and big trading partners such as China and Mexico have yet to dampen enthusiasm for industrial property development in the Inland Empire.
The ports of Los Angeles and Long Beach, which combine to make the busiest seaport in the country, are struggling to handle the volume of goods coming and going on ever larger cargo ships. The port of Los Angeles processed a record 8.8 million cargo containers last year, up from the previous record of 8.5 million in 2015.
The Inland Empire is one of the few places in the region that has enough room to erect the vast warehouses needed to accommodate growing distribution demands, CBRE broker Kurt Strasmann said.
"We're in a broad-based recovery," he said. "The effect of e-commerce has been tremendous, and we're only in the first inning with that. We feel very good about the next 18 months to two years."
Giant warehouses facilitate internet shopping, which has leaped from online-only sellers such as Amazon and eBay to conventional bricks-and-mortar merchants who are growing their online offerings.
Wal-Mart Stores Inc. and Kohl's are among many old-line retailers that have secured additional warehouses for the "pick and pack" operations of their growing online sales divisions, which fulfill individual orders as opposed to wholesale shipments to retailers.
Technology has created demand for warehouses so cavernous they would have been too cumbersome to operate efficiently in the past. Not many years ago, a warehouse was where products were stored for weeks or months, such as toys and canned food that retailers would grab to restock their shelves. Sorting, organizing and moving the inventory was a constant challenge.
Tracking goods in the modern age of bar codes, scanners and computers is a comparative breeze. The location of every widget can be identified with pinpoint accuracy and fetched by robots that can lift and carry 3,000-pound loads with ease. The closer such operations are to population centers, the less it costs the retailers and the faster and more competitive they can be in courting cost-conscious shoppers who yearn for bargains and free shipping.
The Inland Empire is one of the best locations for such business. Rockefeller executive James Camp estimates its logistics center is positioned to provide more than 20 million consumers with same-day delivery of goods.
Modern warehouses are also growing taller as well as longer and wider.
The average height of warehouses built in the U.S. has steadily risen from roughly 24 feet in the 1960s to about 33 feet today, CBRE said. E-commerce companies have made use of that additional vertical space by installing mezzanine levels, allowing them to add more workers and machines.
The Rockefeller buildings will have clear heights of up to 36 feet, and the Wolverine building set for completion in June will have 40-foot ceilings. Wolverine's facility at Beaumont's Crossroads Logistic Center is being developed by USAA Real Estate Co. and McDonald Property Group.