The future of transportation and logistics is here

Experts who study the movement of goods say that one of the most significant logistics developments of the 2020s is the continuing buildout and leasing of industrial space in San Bernardino County in Southern California.

As population and commerce push eastward toward Arizona and Nevada, companies that specialize in shipping goods to market are carving out new locations for distribution facilities in the Inland Empire. At the top of their punch list of preferred locations is the High Desert region of northern San Bernardino County.

Located along Interstate 15 about 40 miles north of San Bernardino, the High Desert is home to the rapidly growing communities of Victorville, Hesperia, Apple Valley and Adelanto. The current population of this metro area is 607,000, up 8.8% from 558,000 in 2020.

Today, this area is also a prime breeding ground for warehouses. “In San Bernardino County, industrial growth is pushing into the High Desert,” says Walt Arrington, SIOR, senior vice president of advisory and transaction services in industrial and logistics for CBRE. “In the fourth quarter of 2023, there were two 1-million-sq.-ft. deals done there. Over the last four years, including build-to-suits, there was 4.5 million sq. ft. of new construction completed in the High Desert.”

This trend to push north along the I-15 corridor will continue, says Arrington, who is based in Ontario about an hour south of Victorville. Factors driving industrial developers and tenants northward into the desert include available labor, product price, transportation networks, available new space and the growing desire by workers to shorten their commute.

“A significant amount of labor commutes down from the High Desert into the valley,” Arrington says. “About 80,000 people commute from the High Desert daily. Many of them are employed in logistics. A positive for the High Desert is its available labor pool.”

A commute of 45 to 90 minutes one way is the norm for people who leave the High Desert for jobs in the valley. Developers have discovered that the best way to tap into this labor pool is to build warehouses closer to where workers live.

“There is a very good labor pool up there. Maersk just signed a deal for 1.2 million sq. ft. of space in Hesperia,” says Arrington of the city located 35 minutes from Ontario and 20 minutes from San Bernardino. “Hesperia has landed the last three deals done there. Apple Valley and Victorville are landing big deals too.”

Higher Ground, Lower Land Costs

“The availability of land on larger tracts is driving movement of this industry to the High Desert,” says Arrington. “The economics are a little cheaper in Victor Valley. Labor is 24% of the costs for warehouse operators; and the High Desert has an abundant labor pool.”

The fourth quarter 2023 Inland Empire Industrial Market Report by CBRE shows that the region known as the Inland Empire North (including Victorville, Hesperia, Adelanto, Apple Valley and Barstow) accounted for 2.7 million sq. ft. of industrial space leased or sold. Hesperia and Victorville each did around 1.2 million sq. ft. of deals during the quarter. Only Ontario (at 1.8 million sq. ft.) and Fontana (at 1.9 million sq. ft.) did more.

Arrington notes that Prologis, Clarion and LINK are among the largest investors in San Bernardino County. “We are seeing strong leasing activity from retailers like Home Depot and Amazon,” he says. As 2023 turned to 2024, Goodyear cemented a deal to expand from its previous 800,000 sq. ft. in Victorville to a 1.3-million-sq.-ft. build-to-suit that is in construction and expected to be complete in early 2025.

The next wave of growth, he predicts, will be the eastern outskirts of the county. BNSF Railway purchased 1,500 acres in Barstow and plans to build a large intermodal facility there. “Ports and railroads are looking at ways to expedite delivery of goods out of the ports. The BNSF project is still in the planning process, but it is moving forward.”

One person who’s seen firsthand the effect of this northward push is Victor Knight, economic development manager for the City of Hesperia. “In the Inland Empire, users are now more willing to come further north, where vacant land is more abundant,” he says. “We have 13 million sq. ft. in projects that are in the approval process. The Southern California Logistics Airport is in Victorville, and BNSF has a large rail operation in Barstow. That is driving a lot of the activity in the High Desert.”

The people of Hesperia make this possible, Knight adds. “The workforce is highly available in Hesperia. We are primarily a bedroom community. People commute down the valley to logistics jobs in cities like Ontario, Fontana and Rancho Cucamonga. But that is changing. Hesperia is a lot more affordable. Bringing people off the freeway is a priority for the city. We want our people to be able to spend more time with their families. As we attract more industrial jobs, that is happening.”

The Middle of a $1.8 Trillion Economy

Jay Prag, academic director and professor of economics and finance at the Drucker School of Management at Claremont Graduate University, says that San Bernardino County is poised to enjoy a sustained run of economic growth.

“First of all, geographically, it is enormous,” he says. “It covers 20,000 square miles. It is bigger than nine states. It has over 2.2 million people, and most of the land in the county is under-utilized. If you were to map San Bernardino County and then pull back, you would realize that it is right in the middle of four enormous economic entities: the LA Basin, which has 18 million people and a gross domestic product (GDP) of $1 trillion; San Diego; Phoenix; and Las Vegas. San Bernardino County is right in the middle of a four-city region of 30 million people and $1.8 trillion of GDP.”

He notes that San Bernardino County, “is probably the biggest logistics center in the U.S. That got us the transportation infrastructure. That is here for anybody who wants to use it. This region aspires to be the economic heart of the 30 million people in the tristate economy.”

Prag says all the assets are in place for San Bernardino County to become one of the shining gems in America. “Our region is enormous with millions of people living in successful cities and college towns — from Redlands to San Bernardino. We have enviable higher education. We have a wonderful climate. And opportunities for manufacturing are here.”

Prag is bullish on the growth of green energy, healthcare technology and light manufacturing. “Green energy is the fastest-growing energy sector here,” he says. “It is still relatively small, but it is well suited to the terrain. We have the technology for it.”

Prag expects population growth to continue. “San Bernardino County grew by 0.66% last year,” he says. “This is a place where people move from other parts of Southern California. Middle-class families move here. They are attracted by our good schools and safe streets. We attract educated professionals from other parts of the state. It is a hardworking area. It is well educated. People here have skills. We have some of the best colleges and universities in the world. Educated people will stay here if the jobs are here.”

He says it’s time for CEOs in other states to take a closer look at San Bernardino County. “I would advise a CEO in Georgia or Florida to consider San Bernardino County as a viable expansion location opportunity,” says Prag. “Look at places like Phoenix and Las Vegas that are so close to here. Look at the wealth in LA and San Diego and the amount of land available in the middle of these markets. You won’t find anything like that anywhere else in the country.”

Greener Passenger Service Gets the Green Light

Constant innovation in transportation networks is a big reason why San Bernardino County is a national leader in logistics, distribution, and shipping. You can now add to that list a leadership position in green passenger transportation.

This year, San Bernardino County will add to its roster its first ever Zero-Emission Multiple Unit (ZEMU). “The San Bernardino County Transportation Authority (SBCTA) is leading the charge for a greener passenger rail future by piloting zero-emission rail technology for the new Arrow service between San Bernardino and Redlands,” the county stated in a January release. “In 2024, SBCTA will debut the first in North America, battery and hydrogen-powered passenger train. The ZEMU rail vehicle will use a hybrid hydrogen fuel cell and battery technology to propel the vehicle, providing a cleaner transit option for the community.”

Tim Watkins, chief of legislative and public affairs for the SBCTA, says that “our responsibility is to continue to develop transportation solutions in the county. The Metrolink San Bernardino line is the heaviest use line in the county. When we decided to extend the line by nine miles from San Bernardino to Redlands, we wanted to identify cleaner transportation options.”

That process led the county to adopt ZEMU. “It will have zero emissions,” says Watkins. “We settled on hydrogen. The company developing this technology is Stadler of Switzerland. The impetus for this project was to find the cleanest tech available for transportation. The county continues to work hard to address air quality concerns, and this new ZEMU railcar provides another effective solution.”

Watkins says this drive to go green is showing up in other operations. “The West Valley Connector will link Pomona to Rancho Cucamonga using a bus rapid transit system,” he notes. “It will use zero-emission buses to connect riders to the Ontario International Airport. We’re also rolling out hydrogen fueling stations and electric charging stations for trucks to go zero-emission in Colton and other places in the county.”

Eventually, passengers in San Bernardino County will be able to take a zero-emission, high-speed rail service all the way to Las Vegas, courtesy of Brightline West. “The Biden administration just approved funding to advance that project,” says Watkins. “It will help people navigate the Cajon Pass, and it will provide an alternative to one of the main truck traffic bottlenecks in Southern California.”

All these projects will work together to provide a safer, cleaner, and more efficient transportation system for passengers and commerce alike in the region, adds Watkins. “We’re energized by what’s going on in the county,” he says. “We’re in the middle of a transit renaissance. This is an exciting thing to be part of. We will continue to move forward.”

This article originally appeared in Site Selection Magazine.

Additional County Update News – April 11, 2024

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