If you’re looking for a warehouse in southern California to handle the logistics portion of your business, you’re likely finding prices too much for your business to handle. We’ve seen rates for southern California warehouses steadily increasing over the last 3 to 4 years. Now many southern California businesses are left scrambling and stumped on what to do next.
Here’s a little bit about why the prices are getting out of control, how to combat this price increase, and what to do next to keep your business intact.
Why Southern California warehouse prices are increasing
So why is Southern California Warehouse real estate getting so pricey? There are a few reasons for this:
- Increased demand. California is a major hub for some of the country’s greatest businesses. With online shopping becoming a popular and convenient consumer purchasing option, businesses large and small are looking for options to help them fulfill their online orders.
- Low to no vacancy. There frankly isn’t enough warehouse space in the densely-populated area of the state, creating the opportunity for a price increase and a real problem for those seeking space. If businesses are looking for specific building types (i.e. organic certified), forget about it. Nearly impossible to find exact specifications at a price point that feels reasonable.
- Additional per square foot (PSF) taxes. Large retail warehouse spaces in Southern California, like the Inland Empire, were hit with a major increase in sales tax PSF (up to 4.7 cents PSF). This has greatly impacted quotes from logistics providers.
- WAIRE Program. The Warehouse Actions and Investments to Reduce Emissions (WAIRE) Program has provided some barriers and requirements for logistics providers to navigate. With that means extra cost from additional labor, programs, or other types of assistance to stay compliant or pay fees. This has also impacted costs for logistics providers, increasing the cost for the businesses we serve.
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What are some cost-effective alternatives to offset rising Southern California warehouse pricing?
We know that warehousing space in Southern California is pricey and limited, so what does this mean for SoCal businesses? Are you just supposed to up your prices, or worse, eat into your profit? Actually, the best of both worlds for Southern California businesses and their customers is to move into warehousing space found in Northern California. Here’s why:
- Cheaper PSF rates. We’ve already touched on this, but prices on warehousing real estate in Southern California are getting steep. With this in mind, it could be a no-brainer to consider moving your operations up north.
- Lower transportation rates. Transportation rates are actually typically higher running South to North. Since there is so much more freight moving south to north, the backhaul (open trucks wanting to move freight back to SoCal) is more aggressive so truckers aren’t running back empty. This offers a huge benefit and savings to those moving goods from Northern to Southern California instead of the other way around.
- Faster delivery. Northern California offers more transportation options, therefore, giving you the opportunity to deliver goods faster. Both ferrying and rail are viable and fast transport methods that only Northern California can easily access. Trucks run even smoother with less traffic due to decreased density compared to southern California. Even if most of your business is in SoCal and you need same-day/next-day delivery options, the Central Valley can easily get a Los Angeles, San Deigo, Inland Empire or other delivery made the next day.
- Opportunity for expansion. If you’re looking (or already are) servicing other Western states from one distribution point, your best bet will likely be Northern California for that hub. The overall freight and storage savings are so considerable, not to mention alternate transportation options.
You’re ready to move your logistics to NorCal: What’s next?
If you’re ready to look into moving your logistics side of the business to Northern California, we have a few suggestions on what to do and where to start:
- Get quotes. Make sure you have an idea of what a well established Northern California logistics partner will look like. Speak with a few providers and find the quote that works best for you.
- Weigh pros and cons. Decide what is most important to your business, and find the logistics provider that best aligns by outlining pros and cons of each choice.
- Don’t compromise. Make sure you don’t go with a cheaper price just to save money up front, to actually cost you more in the end.
- Tour the facilities and find a partner you trust. Walk the facilities, talk with managers or workers, and get to know where your goods will be handled and processed.
As a Northern California third-party logistics (3PL) company with locations in the Central Valley, we’re here to help you find the solution that gives you the premium service you desire without eating into your profits. We take our partnerships seriously and consider your successes our own.
If it’s time to make a change, we would love to connect and discuss your program. Contact us if you want to learn more about the benefits of partnering with PRISM Logistics.