Labor Trends in the Powerhouse Logistics Empire
Experts dug into the data behind labor and workforce trends in California’s Inland Empire and the surrounding regions, one of the most competitive labor markets for distribution and manufacturing workers in the western U.S., during a session at NAIOP’s I.CON West in Long Beach, California. Speakers noted that alternative markets like Phoenix and Las Vegas/Reno could provide valuable options outside of the Inland Empire, especially when considering total cost modeling.
The Inland Empire comes out on top according to many metrics in Hickey & Associates’ 2023 analysis, from its labor supply to location. “But if you look at the labor cost, the real estate costs, and the transportation costs, things start to change,” said session moderator Kevin Dollhopf, MBA, MA, MCR, IAMC Fellow, principal, Hickey & Associates. While the Inland Empire is great from a real estate market and returns perspective, occupiers are having heartburn from what’s going on, he added.
Hickey & Associates completed a SWOT (strengths, weaknesses, opportunities and threats) analysis in partnership with the NAIOP Inland Empire chapter, using data collected from corporate executives and service providers. Dollhopf noted that the Inland Empire has the third-highest industrial space saturation index, indicating a lot of competition.
He also pointed out that the Inland Empire labor market has 90% more saturation of warehouse/logistics workers than any other market in the U.S. “That’s really cautionary,” he said. “The Inland Empire is a difficult place to attract and retain tenants right now.”
“Half of our business is in the Inland Empire,” said Ryan Shelton, senior vice president, market officer leasing west, Link Logistics Real Estate. “What we’re learning is that real estate site selection is highly focused on labor and the future growth of labor. What makes the Inland Empire so great is that the concentration of workers, warehouse and material handling workers is very strong, and the amount of growth in the last five years has been 400%, which is extraordinary and unmatched.”
“Our total portfolio – owned, operated and leased – is about 70 million square feet throughout North America with 20 million in Southern California, most of that within the Inland Empire,” said Michael Landsburg, chief development officer, NFI Real Estate. “On the warehousing side, we have about 3,200 employees in Southern California, and about 700 drivers. Retention or turnover metrics are about 25%, which are below our national averages across the portfolio.”
NFI takes a strategic approach to attracting and retaining warehouse and transportation employees, Landsburg said. “We were just named by Newsweek as one of the greatest workplaces for diversity and at the end of last year we were named by Forbes as one of the best workplaces for women. Those don’t just happen – it’s a concentrated effort to make the warehouse or transportation environment attractive for these employees.”
Even though labor costs have increased, the pandemic made companies more accepting and appreciative of what they need to do to keep warehouse and transportation workers showing up and working on the front lines, Landsburg said. He noted that the pandemic has also driven a big push in technology and innovation to support the labor.
“I took a poll of our clients that occupy over 1 million square feet in the Inland Empire and the world is changing,” said Steven Bellitti, SIOR, senior executive vice president, Colliers International. Labor is moderating, even over the last 90 days, he said, just like transportation has moderated over time.
“Everyone is exploring alternative markets and exploring what transportation impacts are going to be, and what labor impacts will be,” he said. Clients are looking to Phoenix and Dallas as great alternatives for labor and from a cost perspective. At times, their calculations may show that these alternative markets are an attractive option, and sometimes the Inland Empire still wins out.
“Corporate America during COVID-19 had no choice but to make decisions, to make a deal ASAP, because they had no other choice and they didn’t have time to make those decisions,” Bellitti said. “Corporate America now has had time to do the analysis to say, ‘Hey, do we need to be in Southern California, or if we do, what’s our right footprint?’ and those are the conversations happening on a daily basis.”
“The truth remains that even after most of our clients do their analysis, they still come back to the conclusion that there are 25 million people [in the Inland Empire], and there are ports, and I know my wife wants her package tomorrow, not in two days, so being closer to the population helps,” Bellitti said.
“The fundamentals of Southern California and the Inland Empire are rare and dynamic,” Shelton said. “At the end of the day, the foundation of this market is irreplaceable, so we feel positive and strong that our portfolio is going to do well here, if the quality and the location are good. The Inland Empire is an amazing market.”
“You can’t service most of the country unless you have a presence in Southern California,” said Landsburg.
This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2023. Learn more about JLL at www.us.jll.com or www.jll.ca.
Marie Ruff is Communications Senior Manager at NAIOP.