W in straw hat, sunglasses and red plaid shirt , Randy Bekendam looks like every inch of her hair is a gray-haired farmer — albeit in a California countercultural way. The tomatoes, zucchini and King David apples he sells this time of year have never seen pesticides. Young family visits his goat to learn about the benefits of soil health. The 70-year-old isn’t shy about sharing his beliefs either. They run deep. The land he leased for 34 years, called Amy’s Farm, has sold out from under his feet. Now, echoing Joni Mitchell, he’s working to stop this rural idyll from being paved and turned into a warehouse.
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, his home province of Ontario, less than an hour east of Los Angeles, is now almost as full as ever with windowless “logistics hubs” and orange and lemon groves. From his ten acres he could see them closing in on him. Across the road, a building the size of 100 American football fields, or 5.3 million square feet (492,000 square meters), has risen from the dirt of what was once a dairy farm. A block away, Prologis, the world’s largest warehouse builder, has nearly built a five-story facility on more than 4 million square feet of land. The blue livery of e-commerce giant Amazon has adorned its upper edge. Nearby, Amazon and FedEx, a package handler, have more large boxes. The 18-wheeled truck sped down the country road between them. The dust they kicked up suffocated a peddler coconuts fríos (frozen coconut) Give the few remaining Mexican farm workers to work on the land. “Those big rigs can go wherever they want,” muttered Mr Bekendam.
Shares fell 21% after FedEx warned of economic headwinds, abandoned profit forecasts and triggered a 21% drop. That quickly sparked concerns about the future of warehousing companies such as $80 billion Prologis. Its shares have retreated from this year’s highs after its biggest customer, Amazon, admitted it was overbuilding.
You might think of the rising risk of a recession, the layoffs at Amazon (though not in Ontario) and the likes of Mr. Bekendam The hustle and bustle of people like this fighting to stop warehouse construction will worry the booming industry. Not at all. Take a tour of Southern California’s Inland Empire, once known as the “Land of Cheap Dirt,” and now the world’s hottest warehouse market, and there’s no doubt the wheels won’t fall off the ship just yet.
Pretty much everything about Inland Empire gets logistics nerds excited. The area is two-thirds the size of Connecticut and is located between two extremely wealthy areas of Los Angeles and Orange County. It is roughly equidistant from Los Angeles and Long Beach, the two largest ports in the United States. It has air hubs and rail networks for FedEx and Amazon. Highways criss-cross, and goods are shipped from Asia to all over the country. And its population is still growing. Real estate firm cbre said warehouse construction has been frantic, reaching a record 39 million square feet in the second quarter. Once built, buildings are filled: the vacancy rate is 0.2%, lower than anywhere else on the planet. Rents have surged 72% over the past 12 months. If they thought consumer demand was peaking, they would resist this eye-popping growth. But rent is still a relatively small part of logistics costs. cbre ‘s James Breeze estimates that freight transportation accounts for about half of a typical company’s supply chain expenses. Warehouse rent is just 6%. In prime locations close to ports, such as the Inland Empire, it may be worth paying dearly for warehouses if trucking costs are reduced.
In addition, structural changes in the global economy are driving demand growth. The shift to e-commerce, though slowed since the peak of the pandemic, requires more warehouse space than brick-and-mortar retail: Goods are shipped in individual packages, not on space-saving pallets, and returns pile up. Supply chain disruption and geopolitical risks have increased the need for additional storage space. Prologis estimates that its clients want to hold about a tenth more “safety stock” as a buffer.
Inland Empire also illustrates some growing pains, including the first signs of a public backlash. Environmentalists claim local councils have passed planning applications with little vetting during the pandemic. A draft communiqué calling for a moratorium on Inland Empire warehouse construction, co-authored by Susan Phillips, director of the Robert Redford Conservation Society at Pitzer College, describes a rapidly spreading public health crisis, especially due to the pollutants emitted by the consumption of large quantities of diesel fuel. Trucks pass schools and hospitals, blocking highways. This year, air quality authorities in Southern California began imposing a quasi-tax on warehouse owners based on “indirect” emissions from trucks that serve them. “They are definitely getting more and more against diesel,” said one logistics boss. Local economist John Husing derided environmental resistance as ” aristocratic duty Bullshit” by wealthy members of the Inland Empire. More blue-collar communities welcome decent jobs, he said. Other employment opportunities are few and far between.
The warehouse company said they started cleaning up their act. Amazon ordered 100,000 delivery vans from Rivian, which makes electric cars. Prologis is building an independent business to provide charging stations for electric trucks. It intends to increase the power generation capacity of the solar panels on its abundant roof tenfold within a decade. However, the industry is unlikely to break free from diesel over the years.
Mr. Bekendam, or Farmer Randy as he is known, admits that stopping the warehouse boom was an uphill battle. But he will keep fighting. At least he hopes the publicity he’s getting from the popular homestead will make developers think twice before bulldozing. “No one wants to feel guilty about laying out Amy’s farm.”
read More articles from our global business columnist Schumpeter:
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Starbucks and the Dangers of Corporate Succession (September 8)
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This article appeared in the business section of the print edition under the title “Space Race”