New Bill Threatens IE Warehouse Development
A new bill, Assembly Bill 98, could significantly restrict or ban new warehouse development in certain Inland Empire cities. While not a blanket ban, the legislation empowers municipalities to enforce moratoriums or impose stringent new environmental and design requirements. This is expected to lengthen entitlement timelines and increase the value of existing, operational warehouse properties.
Authored by Assemblymember Eloise Gómez Reyes, AB 98 is the result of years of debate over the logistics industry's impact. The bill mandates buffer zones between new warehouses and "sensitive receptors" like homes and schools, with specific setback distances for truck loading bays. It also requires the use of zero-emission forklifts and the installation of EV charging stations for trucks. Effective January 1, 2026, the law applies to new and expanding logistics facilities. Cities and counties in designated "warehouse concentration regions," including much of the Inland Empire, must establish designated truck routes by that date, with the rest of the state following by 2028. Non-compliance by local jurisdictions could result in significant fines. The bill saw a surprising mix of supporters and opponents. Backers included some labor unions and the California Chamber of Commerce, who viewed it as a workable compromise to avoid stricter regulations and litigation. Opposition came from real estate groups citing increased development costs, local governments wary of losing control over land use, and some environmental justice advocates who argue the setbacks are insufficient. The legislation comes as the Inland Empire's industrial market is recalibrating. Vacancy rates have climbed into the 7-10% range in early 2026, a significant increase from previous years. This has created a more tenant-favorable environment, with landlords increasingly offering concessions like free rent and tenant improvement allowances to secure deals. Speculative construction starts have slowed dramatically due to higher interest rates. This slowdown in new deliveries is expected to create a "Supply Gap" by late 2026, leading to a potential scarcity of available space and renewed upward pressure on rental rates. Average asking rents have stabilized but are down year-over-year, with some reports showing a 10.7% decrease. In the first quarter of 2026, Class A rents in the West Inland Empire hovered between $1.85 - $2.00 PSF NNN, while the East offered more negotiable, lower rates. Sublease space has become a significant factor, accounting for roughly 20% of availability in late 2025, which has helped to keep overall rental rates in check. Despite the current softness, the Inland Empire remains a critical logistics hub, with strong long-term fundamentals due to its proximity to the ports of Los Angeles and Long Beach.
