Clean air regulators are killing growth in the nation’s largest hub of warehouses and distribution centers just as the region is emerging from the economic recession, developers of industrial real estate in the Inland Empire say.
In the words of John Husing, Southern California’s Inland Empire economist, the South Coast Air Quality Management District’s “myopic concentration on attaining marginal improvements” in clean air is denying a path to the middle class for thousands of local residents who will potentially work in the logistics industry.
The Inland Empire is a vast region that begins about 40 miles east of Los Angeles and covers San Bernardino and Riverside counties. According to the Southern California Association of Governments, the metropolitan planning agency, the region boasts 800 million square feet of industrial real estate.
Hasan Ikhrata, SCAG’s executive director, said the region needs 1.2 billion square feet of warehouse and distribution space, so a gap of 400 million square feet of space exists.
Industrial real estate in the Inland Empire serves Los Angeles-Long Beach, the nation’s largest port complex, local manufacturers and, more recently, the rapidly growing e-commerce fulfillment sector.
Development all but dried up during and immediately after the economic recession of 2008-09, but in the past year logistics industry employment in the region increased by 7,000 jobs, Husing said.
Proposed new projects are being delayed, however, and some may never be built, because of the AQMD’s concerns about truck traffic generated by warehouses and distribution centers, he said.
The clean-air agency apparently has no problem with the facilities themselves. New developments are LEED-certified as being energy efficient, and many boast solar panels on the roofs and other energy efficiencies that take advantage of the climate and wind conditions in the region. “Their issue is with truck trips,” Husing said.
More specifically, the AQMD and NAIOP, the Commercial Real Estate Development Association, disagree about how many truck trips the large, high-cube warehouses, which range from 500,000 square feet to more than 1 million, generate.
The mega-warehouses are the facilities of choice in the Inland Empire. Husing said there is “zero” availability of high-cube distribution space in the region.
Industrial real estate developers say the large, high-cube warehouses generate far fewer truck trips than older, smaller distribution centers. Importers, manufacturers and food processors with older, smaller facilities across the region increasingly are consolidating their operations into one large distribution center.
The consolidation eliminates many interregional truck trips, Ikhrata said. The new facilities are more automated and therefore more efficient. SCAG, which attempts to balance the industry’s need for growth with the AQMD’s mandate to reduce diesel emissions, agrees that the large, high-cube warehouses reduce truck trips. The question is, by how much.
The Institute of Transportation Engineers develops the national model for calculating truck trips from warehouses and distribution centers. John Condas, a partner at the Southern California law firm of Allen Matkins Leck Gamble Mallory and Natsis, said NAIOP and the AQMD generally recognize the institute as an objective group, and the data in its Trip Generation Manual is credible.
The institute for years calculated truck traffic generated by the warehouse sector as 4.96 trips per 1,000 square feet of space. The engineering institute, however, raised the ire of the AQMD when it revised its calculation specifically for large high-cube warehouses, saying those facilities generate 1.44 trips per 1,000 square feet.
In a recent whitepaper, the AQMD advised that planning agencies in Southern California that use the 1.44 number are significantly understating the truck traffic, and therefore the level of diesel pollution, generated by the large facilities. The AQMD calculated the number should be 2.59 trips per 1,000 square feet.
SCAG, which is caught in the middle between an industry that desperately needs to expand and a powerful regulatory agency, believes the real number is “somewhere in-between,” Ikhrata said.
Husing, as well as NAIOP, charge that the gains in clean air sought by the AQMD are marginal, and they come at a high social and economic cost to the region because they deny good-paying, middle-class jobs to a large population comprised largely of minorities with no more than a high school education.
Southern California has registered remarkable gains in reducing harmful emissions, Husing said. The number of days in the region that exceeded the diesel particulate matter and ozone standards in 2011 was only 13, compared with 120 days in 2001, he said.
Any future gains will be marginal, he said, and can be achieved only by blocking developments that generate a large number of truck trips. Husing said there is an element of regional snobbery in seeking such marginal gains.
He charged that regulators tend to be from the San Francisco Bay area, where 42 percent of the adult population has a college degree or degrees, and the Southern California coastal region, with a 32 percent college graduation rate, whereas only 19 percent of the adult population in inland regions is college-educated.
Yet the thousands of warehousing, transportation and logistics jobs being created in the Inland Empire generally require only a high school education, and they pay $48,783 to $55,059 a year, according to a report recently released by Husing.
Peter Herzog, assistant director of legislative affairs at NAIOP, said the industry wants to work with the AQMD to achieve a balanced approach to developing new projects while mitigating diesel emissions to the extent that is technologically feasible. “We’re all working on the environment at the warehouse level,” he said.
The trucking industry has made significant gains in reducing harmful diesel emissions by replacing old, polluting trucks with 2007 and 2010 model trucks that have much more efficient engines and burn clean diesel fuel, Herzog noted. The clean-trucks programs at the ports of Los Angeles and Long Beach, for example, mandated the use of 2007 or newer model trucks beginning in 2008, and truck pollution in the harbor has declined more than 80 percent since then.
Achieving those gains in a controlled environment such as the harbor, where the truck fleet is about 10,000 vehicles and the 13 container terminal operators can deny access to noncompliant trucks, is much easier than in a sprawling region such as the Inland Empire, with its hundreds of warehouses.
SCAG calculates there are 1.2 million truck trips a day throughout Southern California, and Ikhrata said the trucks carrying containers from the ports to Inland Empire warehouses are totally compliant with clean-air regulations.
SCAG, however, calculates that only 3.7 percent of the daily truck trips go directly from the ports to warehouses and distribution centers in the Inland Empire for their first and only stop.
Ikhrata said 87.3 percent of the truck trips in Southern California are internal in nature, transporting freight between warehouses or from manufacturing facilities to warehouses. Although much of the freight originates at the ports, many trips stop first at an intermediate facility where the freight is unloaded and redistributed to a number of other facilities in the region.
Many of the approximately 1 million truck trips each day that don’t originate in or end at the ports therefore involve trucks of model year 2006 or older — higher-polluting vehicles — but their days are numbered.
Statewide rules promulgated by the California Air Resources Board already require the use of diesel particulate traps on older trucks, but the big gains will start in 2015 when CARB will require a phasing out of the oldest trucks. That will be a lengthy process, however, as full phase-out of old trucks and their replacement with 2007 or newer-model trucks won’t be completed until 2023.