California’s long and unwavering march against industrial development continues. The state Legislature passed, and Gavin Newsom has signed into law, AB 98, which places statewide restrictions on future industrial development. Its main objective is to address the concerns from some constituent groups about some of the inconveniences that come with living around the growth of logistics services.
The law puts its focus on “sensitive receptors” which are defined as residences, public parks, schools, nursing homes, hospitals and the like. New developments and redevelopments that are within 900 feet of a sensitive receptor are subject to new requirements such as increased set backs to avoid truck cueing in the street, loading bay orientation facing away from sensitive receptors, and abundant landscaping to screen trucks from view. These restrictions will prohibit cities from approving new projects that do not comply with these laws.
These are just a handful of the new requirements placed on developers near a sensitive receptor and while they may seem reasonable to those unfamiliar with industrial development, these requirements are just the latest in a long list of added costs and design hurdles that have been mounting in California for years. HPP has written about the myriad of challenges developers face in not only finding developable sites in land constrained Southern California, but also the ever-lengthening review and permitting process of local cities. This law now adds to the costs and hurdles that will be added to new projects, and disincentivizes new development and redevelopment of industrial properties. This will serve to constrain supply, drive up rents, and ensure that citizens who live near an aging industrial site will continue to live near “that old building” as it will not make sense to redevelop it.
Much of the anti-development sentiment has come in response to the onslaught of new developments in the past ten years. This activity has mostly been driven by the demand from the growth of the E-commerce sector, which requires a higher amount of warehouse footprint for its operations. Being able to obtain the goods that people purchase online within a short time frame has a cost – more warehouses. Every online order we place contributes to this need and when there is a need, entrepreneurs will act to fill it.
Industrial developers do not build buildings out of love, they build them because the value of the finished product exceeds the cost to do so, and that difference is worth their precious time, talent and resources. Adding obstacles, red tape, and lengthy review processes only increases the cost of doing business which will have the effect of slowing development. Over time this will raise the costs of goods for everything we purchase on or offline as companies pay more rent to compete for an insufficient and declining pool of quality industrial property.
