IE Business Daily Business news for the Inland Empire.
Industrial development in the Inland Empire is every bit the region’s premier economic driver that it’s been made out to be.
That’s the finding of a report by Beacon Economics in Los Angeles and the Pepperdine School of Public Policy, with an assist from two advocacy groups: the Supply Chain Federation in Santa Ana, and the Commercial Real Estate Development Association, formerly known as NAIOP.
Warehouses, logistics, and manufacturing account for 26 percent of the economy in Riverside and San Bernardino counties, according to The Industrial Ecosystem’s Economic Contributions to Southern California, a 51-page study released in June that also takes a deep dive into industrial development in Los Angeles and Orange counties.
That project began one year ago as a way to investigate the role industry plays in the Southern California economy, said Chris Thornberg, founding partner with Beacon Economics.
It’s meant to push back against what its authors believe is too much regulation being placed on industrial development in Southern California, and the damage that’s causing the region’s economy.
“Over the past few years, there have been a lot of regulations passed which have limited the ability of industrial investors to replace existing structures, and build new structures,” Thornberg said during a 45-minute video presentation accompanied the report’s release.
“That’s typically done by focusing only on the negative implications of having an industrial operation in your neighborhood. It doesn’t take into account how important industrial development is to the Southern California economy.”
Two more studies are planned, one on supply chains, and another that will break down how logistics helps support city, county and state governments. Work is expected to start in about a year, but no release dates have been announced.
Industry supports roughly 23 percent of GDP in the Inland Empire, compared with an an estimated eight to nine percent in Los Angeles and Orange counties. Both are considered solid industrial markets when compared with the rest of the state.
Industrial jobs in the two-county region total approximately 232,500, with most of those on the west side: Ontario, Corona, Rancho Cucamonga, Chino, and Chino Hills. Many of those are near Ontario International Airport.
Nearly 113,000 of those jobs are in warehousing and storage, while manufacturing accounted for approximately 81,200 jobs. The Inland Empire’s remaining industrial jobs were spread among multiple categories, including wholesale trade, truck transportation, and food and chemical manufacturing.
“If you’re looking for the main takeaway (in the report) regarding the Inland Empire, I think that’s it,” said Tim Jemal, chief executive officer of the Supply Chain Federation. “The jobs number was a pleasant surprise. When you consider that they’re well-paying jobs that offer benefits, it helps explain why the Inland Empire has a high quality of life.”
Orange County, a region the Inland Empire is often compared to, has approximately 34,500 industrial jobs and 46,500 manufacturing jobs, according to the report.
Historically, the Inland region has been able to attract warehouse-distribution projects – especially warehouse-distribution facilities – because of its vast supply of open, affordable land zoned for industrial use, and its so close to the ports of Los Angeles and Long Beach.
In recent years, finding a site on the west end large enough to accommodate a “big-box” logistics operation of one million square feet or more has become more difficult, but the Inland region retains its reputation for being the warehouse of the western United States.
“The Inland Empire has the largest industrial sector in Southern California, and Orange County has the smallest, but Orange County still has a thriving industrial market,” Thornberg said. “That’s something that we all have to keep in mind.”
The report concludes that industry is the “cornerstone” of the Southern California economy.
Industrial development in the four counties accounts for 1.4 million jobs, direct and indirect, while it pumps approximately $196 billion into the local economy. It makes up roughly 11 percent of the region’s GDP.
Industrial development also covers a lot of ground: more than 66,000 industrial properties spread across all four counties cover approximately 2.5 billion square feet.
Industrial development is responsible for about $1 of every $9 produced in the four counties, the study found.
“Those numbers are unbelievable,” Thornberg said. “And the GDP numbers don’t include the full supply chain of the businesses working here, they’re just the basic footprint. And we’re not talking about all of California. We’re only talking about four counties.”
Another pleasant surprise: industrial jobs, especially those in warehouse-distribution facilities have a reputation for not paying well, but the study suggests that’s not the case. In fact, it pays better than most sectors.
Average annual compensation in Los Angeles County, Orange County and the Inland Empire is $75,074, $82,102 and $64,987, respectively.
Some critics of the logistics industry maintain that warehouse-distribution centers don’t provide enough well-paying jobs to justify the amount of land they take up and the damage they can cause to neighborhoods, but the Beacon/Pepperdine study doesn’t bear that out.
To cite two examples, the average salary in computer and electronic manufacturing is $110,454, while transportation and equipment manufacturing pays an average of $104,036. Overall, the average industrial sector salary is $76,092, well above the average annual wage in Southern California, according to Thornberg.
“Like everything in economics, this comes down to a cost-benefit analysis,” Thornberg said. “If we’re going to constantly regulate and re-regulate industrial developmental, we have to understand what the losses created by those regulations are. We need to acknowledge that industrial jobs are some of the best jobs we have, and that we’re losing them.”
