Logistics provide a path out of poverty and, with salaries averaging more than $40,000 a year, allow young workers without college educations to enter the middle class, said John Husing, founder of John Husing Economics and Politics.
Speaking to the fall meeting of the International Warehouse and Logistics Association, Husing rebutted arguments that the truck traffic warehouses and distribution centers attract is a major cause of respiratory and other health problems.
Husing cited a University of Wisconsin study that concluded lifestyle habits, diet, and lack of access to medical care associated with low incomes account for 90 percent of the health problems associated with poverty. Pollution from trucks accounts for only 10 percent, and that percentage will continue to drop because of clean diesel engines now are required at the ports and increasingly throughout California.
Southern California’s Inland Empire is served by Los Angeles-Long Beach, the largest U.S. port complex, and is the regional distribution hub for the second largest population center in the United States.
That makes the region an excellent laboratory for testing Husing’s theory that the road to political success in industrial real estate development is to seek a coalition of Republican lawmakers, who normally consider themselves business-friendly, and Democratic lawmakers who represent high-poverty areas such as the Inland Empire.
This strategy should work even in California where Republicans hold only 14 of the 50 state Senate seats and 28 of the 80 seats in the Assembly, Husing said.
The jobs argument will become even stronger with the spread of logistics centers tied to e-commerce fulfillment, which tend to have a much higher number of employees per square foot than traditional warehouse and distribution activities, he said.
Industrial real estate developers should be mustering these arguments, Husing told the IWLA, because industrial development in the Inland Empire is again red hot. More than 20 million square feet of industrial properties are under development The vacancy rate for existing square footage has plunged to 3.6 percent from 12.8 percent during the depths of the economic recession in the third quarter of 2009.
Developers are hungry for new properties because the four-county Southern California market served by the ports is almost out of space. “There is no space left in Los Angeles,” Husing said.
The Southern California market in total boasts more than 1.5 billion square feet of industrial property, by far the largest concentration of warehouses and distribution centers in the country. The Chicago area is second with about 1 billion square feet. Southern California consistently has among the highest rental rates in the country as well.
Good Inland Empire locations that can accommodate 1 million square-foot-plus properties that retailers and large importers seek to build are becoming scarce in areas ready access to the ports. However, adequate acreage is still available in the eastern Inland Empire about 50 miles from the ports.
Industrial developers across the country face increasing difficulty winning community support for warehouse construction, especially in inland locations served by seaports. One reason: those areas already have a large concentration of distribution space and heavy truck traffic, which many people associate with pollution.
However, many of these inland locations have higher rates of poverty than the coastal cities. For example, 25.4 percent of the children in the Inland Empire live below the poverty line. “Those are frightening numbers,” Husing said.
By contrast, 16.5 percent of the children in the affluent San Francisco Bay area live in poverty. Husing said some of the most powerful clean-air regulatory agencies in California are located in the northern part of the state. He said they tend to be so rigid in promoting incremental improvements to air quality that the regulations they promote hurt the poorer populations in the Inland Empire and Central Valley. “They suppress jobs leading to the middle class,” he said.
The most compelling argument for attracting warehouses and distribution centers to the poorer population centers, which also have the lowest percentage of college graduates, is that logistics jobs pay well, and the vast majority of the jobs require only a high school education.
A middle class income in California is defined as $65,000 per year for a family, and many families now rely on two wage earners, Husing said. The median pay for logistics jobs in the Inland Empire is $43,583. Add to that annual salary the wages of the spouse, even if those wages are lower, and families with the breadwinner working in logistics become part of the middle class, he said.
Husing’s study of the educational level of workers in logistics in the Inland Empire shows that 83 percent of the workers have a high school education or less. Many jobs outside of logistics with a requirement for only a high school education pay much less than $43,583 a year.
The advent of the clean diesel engine in model year 2007, and the even cleaner 2010 engines, and the ultra-clean diesel fuel now used nationwide, contradicts assumptions hat freight transportation-related traffic continues to result in abnormally high rates of respiratory diseases and cancers in those communities, Husing said. The joint Los Angeles-Long Beach clean truck plan has reduced particulate matter emissions by more than 90 percent by banning all trucks with engines older than 2007.
Even more compelling, Husing noted, is a study of the Riverside, California, region which historically has had some of the dirtiest air in the state. The number of days each year that exceed the federal Environmental Protection Agency standard for PM emissions plunged from 120 in 2001 to 5.3 days last year, even though 225 million square feet of logistics space were added during that period.
The jobs argument will become even stronger with the spread of logistics centers tied to e-commerce fulfillment, which tend to have a much higher number of employees per-square foot than traditional warehouse and distribution activities, he said.