Date: Wednesday, March 29, 2023
Source: Wall Street Journal
Bob Cassilly describes himself as pro-business. But as the newly elected county executive of Harford County, Md., he is trying to stop construction of giant warehouses that feed e-commerce and other businesses.
Mr. Cassilly has proposed a six-month moratorium on warehouse construction in the county, which lies between Philadelphia and Baltimore. Until now, Harford County has had few restrictions on industrial development.
But the rumble of round-the-clock truck traffic has become a nuisance, Mr. Cassilly said, and many local residents complain that the prevalence of exhaust is a public-health issue.
Unless his proposal to restrict warehouse development is enacted, he said, “I’m stuck in perpetuity with the endless 18-wheelers and delivery trucks, the traffic, the pollution.” The County Council is expected to vote on the proposal next month.
Americans have grown accustomed to buying everything online and having it arrive within days or sometimes hours. But there is a growing backlash against traffic and other quality-of-life issues that accompany the megawarehouses required for e-commerce. Elected officials from southern California to the Cleveland suburbs to Bloomingdale, Ga., have passed moratoriums on warehouse development.
The pandemic supercharged industrial construction, which has far outpaced other commercial property types. About 1.6 billion square feet of warehouse space has been built nationwide since early 2020 and another 825 million square feet is under development, according to data and analytical firm CoStar Group Inc. That total square footage is comparable in size to the city of Boston.
The industrial sector has been a boon for owners. Rents for industrial properties have risen 40% nationwide over the past two years, making it a top performer in the commercial property sector, according to Green Street, a commercial real-estate analytics firm.
Developers say that building and operating warehouses creates jobs and tax revenue. If consumers want the convenience and lower prices often associated with online shopping, they add, warehouse construction is part of the equation.
“Instead of going to the store, we want the store delivered to us,” said Jason Tolliver, who co-heads logistics for the Americas at real-estate firm Cushman & Wakefield.
Prologis Inc., the world’s largest logistics developer, wrote in a recent research report that a shortage of developable land in California coupled with local opposition to warehouse construction would likely result in industrial development shifting to Texas.
Such a move would be well received by many residents in southern California’s Inland Empire, located near the busy ports of Los Angeles and Long Beach. Warehouse square footage in the region has roughly doubled over the last two decades to about 825 million square feet across 4,000 warehouses, according to the Robert Redford Conservancy for Southern California Sustainability at Pitzer College.
Another 215 million square feet of warehouse space is pending approval or under construction, said Susan Phillips, the program’s director and an associate dean at Pitzer College.
Residents sent a letter to California Gov. Gavin Newsom earlier this year asking him to enact a regional moratorium on warehouse construction pending further study of the health and environmental impacts. A spokesperson for Mr. Newsom said the governor has multiple initiatives under way to address air pollution.
Legislation that would have required a 1,000-foot buffer between large warehouses and homes, schools and hospitals in the Inland Empire stalled in the state Senate last year, though a similar bill has been reintroduced in the Assembly.
Meanwhile, at least eight cities in the Inland Empire have enacted moratoriums on warehouse development in the past several years. But approvals from town and city officials who depend on building-permit and tax revenue from warehouse developers have kept warehouse construction humming.
“There’s just a massive amount of projects constantly getting greenlighted,” Dr. Phillips said.
Nationwide, warehouse development has fallen in recent months, largely due to rising interest rates. New construction starts peaked at about 242 million square feet in the third quarter of last year before dropping about 36% the following quarter, according to CoStar. The slowdown has continued into 2023.
Mr. Cassilly said Harford County’s experience following the 2021 completion of a more than 2 million-square-foot distribution center in the peninsula community of Perryman has soured local residents on megawarehouses, or those 1 million square feet and larger.
The county is planning to build a new road, at taxpayers’ expense, to alleviate traffic around the warehouse, Mr. Cassilly said. He would like to see zoning changes that require developers to shoulder these costs.
Some Perryman residents have raised $100,000 to fight another proposed warehouse nearby, which would span 5.2 million square feet across five buildings. Last summer they filed a lawsuit to block the project, which is pending in court.
“We have rural roads with no shoulder, no sidewalks that all this traffic and trucks would have to go down,” said Paul Fallace, one of the group’s 20 members.
Residents want the property turned into a public park. Mr. Cassilly would like to see the land developed for use by businesses, but not warehouses.
Chesapeake Real Estate Group, the warehouse’s developer, filed a motion to dismiss the lawsuit and plans to go ahead with the project. It has been working its way through local and state approval processes since late 2021, said partner Matt Laraway.
The company said it has made several commitments to mitigate the impact to the local community, including leaving 43% of the 700-acre property undeveloped, building an access road for local traffic, and planting trees on the 200-foot setback between the site and abutting residential properties.
“I’m not surprised that some folks don’t want additional warehouses in their communities,” Mr. Laraway said, but added that there is significant corporate demand for industrial space and “a severe lack of supply.”