June 1, 2020
By Dennis Kaiser
It might be easy to focus on the agricultural and western ranch activities of California’s Southern Central Valley and overlook the region’s growing commercial real estate activity. But, the fact remains, there is an important industrial core emerging in the Bakersfield market. The southern reaches of what has often been called Americas breadbasket, sits outside of the hustle and bustle of Southern California’s urban fabric. That location provides industrial occupiers a distinct logistics advantage for a host of factors.
First, the Bakersfield area is unencumbered by the transit snarls that clog Los Angeles’ freeways. Goods are able to move in and out of the Southern Central Valley with ease. Second, and perhaps most important for logistics and supply chain operators, the location allows them to serve vast consumer bases, while remaining close enough to the ports to expedite goods movement. “The Central Valley is ideally located to move goods around the West Coast,” says Joe Vargas, president at Wonderful Real Estate Development, which develops and manages several industrial projects in the Central Valley. He notes the Central Valley location allows companies to serve the Western United States in a single-day turn. This means the entire population of California is reachable in that time frame, and on two-day turns the delivery reach expands to 70 million people, encompassing every Western state.
In Q1 2020, Wonderful delivered a one million square foot speculative facility at Wonderful Industrial Park, a 1,625-acre fully-entitled logistics park located in Shafter, CA, just north of Bakersfield. The park is entitled for 25 million square feet of development, and currently has roughly nine million square feet of occupancy, either leased or owned. Vargas says the project stands out because there are fewer than 20 like it in the entire United States. Ross Stores, Inc. leased the park’s previous one million square foot speculative facility upon completion in 2018.
Wonderful’s other Bakersfield area projects include Crossroads Business Park, which currently has 40,000 square feet of office and retail condominium units developed and an additional 40 acres of land available for office, retail, and industrial development; and the 180-acre North Meadows Business Park, located near the Bakersfield Airport. Wonderful Real Estate’s Central Valley projects place them within two and one-half hours from the critical ports in SoCal of Los Angeles and Long Beach, as well as Port Hueneme, a vital entry point for vehicles and fresh produce. Additionally, a Bakersfield/Shafter location is just four hours from the Bay Area’s key port in Oakland.
Overall, industrial market activity in Southern California and nationally continues to be robust. That fact is highlighted by the low vacancy rate of 2.1% across SoCal’s roughly one billion square feet of industrial space. “Factor in the functionally obsolete space and high demand, it is easy to see why the region continues to report record lease rates and sales prices,” notes Vargas. Currently, there’s about four million square feet of space under construction, and even though the market added 5.2 million square feet, Vargas says, it was such a small amount that it “didn’t make a dent,” in market fundamentals.
What is making a difference in space absorption is the fact that owners and users are seeking new, state-of-the-art facilities that feature 40-foot or higher clear heights, large truck courts, 60-foot speed bays, large column spacing, and a host of modern “bells and whistles,” says Vargas, which have all been factored into Wonderful’s projects. “It is vital that maximum rack-to-clear heights are achieved today,” he says, “because occupiers are packing more product into buildings.” The evolution of the warehouse facility has advanced to include sophisticated technologies used to pick product, as well as mezzanine space to maximize every square inch of a facility.
Wonderful delivers the trophy buildings tenants seek, along with attributes that appeal to today’s supply chain logistics user. “Wonderful offers modern facilities with 300-foot truck courts, loading capabilities, and the ability to park up to 1,000 employee cars because our Central Valley projects are not land constrained. There is plenty of room for trailer parking and storage of up to 350 to 400 trailers, and that appeals to ecommerce users who’ve been land constrained in the Los Angeles Basin, unable to expand or accommodate parking for additional employees,” Vargas says. “Many tenants are realizing it is difficult to find land with expansion opportunities in an urban market.”
The Central Valley’s economic growth has also fueled its emergence as a quality place to live. Once thought of as only an agricultural economy, the market has blossomed with highly-skilled jobs, affordable communities for families and a growing base of businesses. In fact, Vargas says companies that locate in the region have discovered a strong labor pool, noting tenants at Wonderful’s properties report their employee turnover averages about 5% annually, which significantly reduces onboarding costs and turnover risks.
Enhancing the quality of life in the Central Valley hasn’t escaped the notice of the Resnick family, owners of Wonderful Real Estate Development, which is part of The Wonderful Company. The $4.5 billion consumer goods family of companies is led by Lynda and Stewart Resnick, whose philanthropic endeavors to improve their local Central Valley communities are widespread. Through its award winning charter schools and other community-wide scholarship, career pathway, and grant programs, the Wonderful Company’s educational efforts have reached more than 55,000 students across 83 schools in 24 districts.
The Wonderful Company’s motto, “Doing Well, By Doing Good,” has certainly been evidenced by its efforts to help its local communities during the COVID-19 outbreak. The company has responded by providing internet service so more than 4,500 students could continue distance-learning in rural towns. Wonderful has also provided more than 500,000 grab-and-go meals for employees and their families, delivered more than 72,000 baskets of essential supplies and food to employees, sourced and delivered more than 50,000 N95 masks to UCLA, and provided more than 10,000 bottles of hand sanitizer. The company has also donated 1.6 million Halos to Kern County schools, Central Valley hospitals and local food banks.