Hickey and Associates published a new report titled “Inland Empire 2023 Report: What are the headwinds and tailwinds facing the IE logistics and warehouse labor market? The report shared several vital insights.
The counties of Riverside and San Bernardino in California have become one of the hottest warehouse and logistics markets in the United States, earning the moniker “the Inland Empire.” The region, just 60 miles west of Los Angeles, has become attractive for companies due to its easy accessibility, location near ports serving Asia, inexpensive cost structure, and ability to serve one of the largest U.S. population centers. Over the last two decades, the region has experienced the perfect storm of economic forces, creating a formidable logistics empire.
Favorable Real Estate and Population Metrics
The Inland Empire consistently ranks among the top five distribution markets by major brokerage houses and economic organizations. Wages for all workers are 5.6% lower than the U.S. national average; however, material-moving workers earn a median annual wage of approximately 10% higher. Wages for all workers reportedly grew 13.7% from 2020-2022, while wages for transportation and material movers grew 23.1% during the same period.
Industrial real estate demand continues to outpace supply, making it one of the country’s hottest industrial real estate markets. The Inland Empire’s industrial real estate market has lower vacancy rates than the already low U.S. average, and 12-month rent growth was 50% higher than the U.S. average. With a shortage of industrial buildings, prices will likely grow as supply cannot meet increasing demand.
Hiring Activity and Companies
Ontario, Riverside, and Fontana saw the highest job postings in 2022. These cities correspond to where the largest concentrations of employers and employees are located and where the highest industrial rents can be found within the region. Staffing firms such as Randstad and Staffmark, transportation firms like UPS, FedEx, and Ryder, and major retailers such as Amazon, Walmart, and Home Depot had the most postings for transportation and warehousing positions in the last year.
Local Ports and Growing Warehousing Sector
The Ports of Long Beach and Los Angeles are the premier entry points for goods to the American powerhouse market. Since 1980, container traffic to the ports has increased twenty-fold. From 1992 to 2006, port traffic rose an average of 10% yearly. The Great Recession was the first time in both ports’ history when container traffic decreased significantly. From 2010 to 2022, port traffic increased at an average rate of 4.1% per year, building on already high volumes.
Alternative Distribution Locations
While the Inland Empire remains a key powerhouse logistics empire, headwinds of total operations cost, warehouse saturation index, and location quotient reveal increasing labor risk and the potential value of alternative markets. An IE labor SWOT survey of market participants reveals the increasing risks to the market’s continued viability for logistics/warehouse workers. Therefore, the alternative markets of Phoenix, Las Vegas/Reno, High Desert, and Central Valley should be further analyzed and considered as alternative distribution location options based on labor market indexes and total cost modeling.
The Inland Empire’s location, accessibility, and low cost of living have made it a logistics powerhouse over the last two decades. Amazon, Walmart, and Home Depot have established a significant regional presence. However, the region’s success has led to challenges such as a shortage of industrial buildings and increasing labor risks. Companies should consider alternative distribution locations, but the Inland Empire’s position as a top-five distribution market in the country will likely continue for the foreseeable future.