Traditionally, port cities have been the most desirable locations for warehouses and distribution centers. But these cities are among the most expensive real estate markets in the U.S. Rents can be as much as two-thirds more than the national average.
E-commerce giants, with Amazon being the most prominent, are now moving further inland. By doing so they save significantly on space, with rents at or below the national average. They also save through consolidation, establishing enormous facilities that would never fit in the restricted plots available in coastal metros.
Case in point: The rise of the Inland Empire
In California, the Inland Empire region is a prime example of shifting commercial trends. Speculative development in the area has surged, with multiple distribution-center type facilities of 500,000 square feet or more under construction.
Inevitably, the increased demand has raised prices. Rent per square foot has risen 8.2% year over year. However, the average for the region remains about 4% lower than the national average, and around 37% less expensive than nearby Los Angeles.
It remains to be seen if e-commerce can coexist peacefully with their new inland neighbors. With up to 300 delivery trucks servicing a 500,000-square-foot facility per day, these sites generate a lot of pollution and traffic. In response, California has raised environmental and sustainability requirements for warehouses, with the aim of directly impacting development in the Inland Empire.