Photo by The Dallas Morning News
It's Getting Harder to Build Warehouses
Warehouse developers are facing a problem that residential builders know well: community resistance to their projects. Many local governments are limiting or even stopping new logistics hubs that have grown across the country to serve online retailers.
After years of national job growth, many elected officials are not as happy as they used to be for the jobs these facilities make.
Instead, they are more aware of resident complaints about more traffic, noise, pollution, and the pressure on local infrastructure from the big trucks that go through their towns to and from these warehouses.
From 2020 to 2022, hundreds of millions of square feet of warehousing came onto the market. This has made developers clash more often with activists, most of whom say they are fine with the jobs, goods, and tax benefits of warehouse development so long as it’s not near them.
The fight is happening in more and more places -- urban, suburban, and rural areas. But the fight has been most intense and visible in states that have many people, strict environmental and permitting rules, and big air and sea ports.
“It’s just getting harder to build warehouses," Dan Letter, the president of Prologis, a real estate investment trust that specializes in logistics facilities, said during an investor day meeting in mid-December.
Southern California, South Florida and New Jersey — all big growth markets with strong community action and powerful planning and zoning commissions, have become especially problematic, Letter said.
The number of warehouses in the Inland Empire, about 60 miles east of Los Angeles, has grown from 234 in 1980 to over 4,000 today, according to a September story by CalMatters, a nonprofit news outlet. About 300 of the 4,000 facilities are very close to a school, the outlet said.
Critics told CalMatters that only a few applications have been turned down in the last five years. The big growth has made the Inland Empire the biggest warehouse complex in the country. Critics have asked Gov. Gavin Newsom and state legislators for help.
In New Jersey, lawmakers had to look at about two dozen warehouse-related bills in a lame-duck session at the end of November, NJSpotlight, an outlet funded by different foundations and business groups, said. The bills would answer public calls for state action to slow down the warehouse building boom occurring in that state.
Last year, the village of affluent Deerfield, Illinois, turned down a developer’s plan to turn the 101-acre corporate campus that hosts the headquarters of medical technology giant Baxter International into a major logistics hub.
Deerfield’s village board is likely to pass more strict zoning restrictions to make sure that developers of e-commerce fulfillment facilities know they are not welcome.
Warehouses that store, for example, supplies for local plumbers can still get permits. But logistics centers that are meant for the frequent movement of trucks full of consumer goods will not happen in Deerfield.
“We’re sending a clear message that you should look somewhere else instead of asking us to change our zoning to allow logistics centers,” Andrew Lichterman, Deerfield’s deputy village manager, told The Wall Street Journal.
Industrial property has been a strong performer in the commercial real-estate business for most of the last few years. Retailers have been keen to expand their e-commerce operations and offer more shoppers next-day or same-day delivery by adding distribution centers and other warehouses.
But recently demand for new space has fallen as consumers started going back to stores. Construction starts have plunged as higher interest rates raised costs and leasing has slowed in some markets, partly because a construction boom during the pandemic created a space surplus.
“It’s taking several years to get your project from the dirt being ready to having all the final approvals,” Vince Tibone, managing director at analytics firm Green Street, told The Journal.
In California, residents of Moreno Valley have sued the city over its approval of a 40.6 million-square-foot warehouse project that would be the largest in the country. The residents have argued that the project would harm the environment, public health, quality of life and local economy.
In Pennsylvania, residents of Upper Macungie Township have opposed a plan to build a 1.2 million-square-foot warehouse near their homes. The residents have complained about the potential impacts on traffic, safety, noise, light and aesthetics.
In Ohio, residents of Etna Township have fought against a plan to rezone 345 acres of farmland for warehouse development. The residents have cited worries about increased traffic, noise, dust, water runoff, and loss of rural character.
“Nimbyism is a bigger issue,” Seth Martindale, senior managing director in CBRE Group’s Americas consulting practice that helps companies with industrial site selection, told The Journal. “People want next-day delivery but they don’t want a distribution center near them.”
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