T
he newly proposed legislation in California aims to limit the construction of large warehouses across the state, sparking controversy among various stakeholders. The bill, which has been passed but not yet signed into law, has drawn opposition from both commercial real estate developers and environmental groups.

    The commercial real estate industry, represented by NAIOP SoCal, a trade group, has expressed concerns about the legislation's potential to hinder development and drive businesses out of the state. They argue that the bill imposes impractical mandates that undermine local control and stifle economic growth.

    On the other hand, environmental groups are concerned about the increased traffic and pollution that could result from the increased truck traffic associated with large warehouses. They fear that the bill does not go far enough in addressing these issues.

    The legislation specifically targets warehouses larger than 250,000 square feet and requires buffer zones of several hundred feet between these facilities and residential neighborhoods and schools. In some cases, setbacks of up to 500 feet may be required.

    The Inland Empire, comprising San Bernardino and Riverside counties east of Los Angeles, is particularly affected by this legislation due to its extensive freeway and rail links to seaports, making it one of the largest warehouse markets in the U.S.

    While the exclusion of smaller warehouses from the legislation may provide some solace for developers who have invested in larger developments amidst a surge in online shopping and delivery, the bill's potential impact on the Inland Empire's booming warehouse market remains a significant concern.

    Nationwide average lease rates for warehouse space have risen by 7.7% in the first half of 2024 compared to last year, with rates in the Inland Empire averaging $1.24 per square foot, significantly higher than the national average of around 70 cents per square foot.