Amazon Triples Southern California Delivery Hubs Including New Irvine Facility

Friday, March 26, 2021

Main News Photo

(Orange County Register)

The big trucks arrive in the dark, bearing Xboxes, bento boxes, printers, and playsets.

After dawn, cargo vans load up with everything from apple slicers to yoga mats, then fan out into the neighborhoods, where drivers knock and drop, then speed off to their next delivery.

Now, with online shopping skyrocketing amid last year’s pandemic lockdowns, e-commerce retailers are scrambling to open more and more “last-mile” delivery stations in a mad dash to speed up distribution. And no one is expanding faster than Amazon.

Last year, the Seattle-based tech giant tripled its suburban logistics nodes from nine to 32 in Southern California, adding new hubs from Mission Viejo to Palmdale, from Playa Vista to Upland, and new facilities in Irvine and Santa Ana.

The expansion will increase Amazon’s “last-mile” distribution footprint to 5.2 million square feet, nearly quadrupling its space in the region and dwarfing acquisitions by all other competing retailers and logistics firms.

“We are constantly exploring new locations and weighing a variety of factors when deciding where to develop sites to best serve customers,” Amazon spokeswoman Eileen Hards said in an email.

Amazon declined to provide more details about its expansion plans, saying “we don’t provide information on our future roadmap.”

But commercial real estate executives and other retailers said it’s all part of a nationwide e-commerce explosion that’s driving up the cost of industrial property while driving down industrial vacancy rates.

“There’s more demand for space because e-commerce is booming,” said Ryan Patap, a Los Angeles-based market analytics director for commercial real estate data firm CoStar.

Last year’s e-commerce sales were up at least 32% from pre-pandemic levels, with 2020 estimates ranging from $792 billion to $861 billion, according to the U.S. Census Bureau and Digital Commerce 360.

In Southern California’s four-county region, consumers spent an estimated $12.5 billion buying goods just through Amazon last year, up almost 38%, according to a separate analysis by the Economic Roundtable, a Los Angeles-based non-profit policy research group.

In all, Amazon delivered an estimated 1.1 billion packages in the region last year, up from 834 million in 2019, the Economic Roundtable estimated.

“There’s an absolute boom going on with e-commerce and industrial space, and it’s impacting real estate in a huge way,” said logistics investor Joe Mishurda, managing partner for Newport Beach-based North Palisade Partners, which owns land in Lynwood and Anaheim used for parking off-duty delivery vehicles and trucks.

“What people expected to happen in 20 years happened in one year with COVID,” Mishurda said. “People are adopting e-commerce at a greater rate.”

Speeding up deliveries

Last-mile delivery is the final crucial step in a complex, global supply chain that focuses on getting packages to customers’ doorsteps in as little as a day.

Amazon has been speeding up its network since 2013, using last-mile sites as way stations to get its products through congested, densely populated areas.

The hubs range in size from an 18,600-square-foot station in Buena Park to a 620,000-square-foot building in the City of Industry that’s so big cargo vans could be seen driving into it on a recent Wednesday.

Typically, semi-trailer trucks deliver packages from Inland Empire fulfillment centers to smaller delivery stations at night, when freeway traffic is light.

Then drivers for private contractors working with Amazon’s delivery service partners and “Amazon Flex” programs load up Sprinter vans and fan out during the day, using hand-held tracking and navigation devices.

Working alone in 10-hour shifts, drivers deliver well over 100 packages a day — and more during the holidays.

The company’s goal is to have virtually all of Southern California within a 45-minute drive of a delivery station.

The 32 last-mile sites Amazon either owns, leases or is developing in the region don’t include at least 19 large fulfillment centers, sorting centers and air cargo facilities based mainly in the Inland Empire, with nearly 13 million square feet of space, according to an internal research report by the Teamsters and data from logistics consulting firm MWPVL International. Nor does it include property Amazon owns or leases in the region for movie production or for off-duty van and truck parking.

The giant Inland Empire fulfillment centers — some as big as 800 single-family homes — are too far from populous areas for rapid deliveries, said John Husing, an Inland Empire economist. 

“As Amazon is increasingly under pressure to do one-day delivery, they’ve got the aircraft carriers out here, (but) you need those subsidiary facilities to deliver because you can’t do it all from (the Inland Empire),” the Redlands-based economist said in a phone interview. “It takes too long, and the traffic is too bad. So hopefully you can move it at night when there’s low traffic.”

Nineteen of Amazon’s 23 new last-mile sites are in Los Angeles and Orange counties, home to three-fourths of the region’s population. Seventeen of its 19 large-scale fulfillment, sorting and air cargo centers are in Riverside and San Bernardino counties.

The new delivery stations range from a converted Costco in Torrance to a former Wickes Furniture store in Anaheim and a former Mattel toys distribution center in the City of Industry.

Amazon plans to build a new 112,485-square-foot warehouse on the “Field of Greens,” a vacant lot behind the former Orange County Register building in Santa Ana where the Second Harvest Food Bank used to grow produce. Amazon paid $63.2 million for the former newspaper site on Oct. 19.

Ten days before that, the company paid $112.5 million to buy a 31-acre bell pepper farm in Irvine. Documents filed with the city show Amazon plans to build a 145,419-square-foot warehouse on the site, with 735 parking stalls for delivery vans.

Amazon also is in the process of converting the former Mitsubishi North America headquarters in Cypress into another logistics site, leaving the automaker’s sleek, glass office building on busy Katella Avenue vacant for the duration of the 10-year lease to screen off trucking activities, a city report said.

“It will simply stay up for aesthetic reasons,” Nancy Shultz, Southern California market leader for property owner Duke Realty, said of the empty Mitsubishi building.

Rapid growth

The local expansion is part of a nationwide push.

Amazon’s North American logistics network increased 50% in 2020, according to the company’s year-end earnings report.

That included the purchase or lease of 101 million square feet of space last year for fulfillment and data centers and other uses, the report said.

Amazon operates about 400 last-mile delivery centers in the United States, according to MWPVL International. Bloomberg News reported the company eventually plans to increase that capacity to 1,000 to 1,500 small delivery hubs to bring goods closer to consumers.

As Amazon builds out its last-mile capacity, its reliance on third-party logistics firms, the U.S. Postal Service, FedEx and UPS has decreased.

Locally, the number of warehouse workers, drivers and others working for Amazon directly or through private contractors jumped 61% last year to 92,000 employees, the Economic Roundtable estimated.

Meanwhile, large property investors and real estate investment trusts like Duke Realty are scouring the landscape in search of sites in well-developed areas with empty warehouses and plenty of parking — especially those in close proximity to freeways and rooftops.

In Los Angeles and Orange counties, demand for those properties is insatiable, even as other property sectors, like offices and shopping malls, are seeing vacancies rise and values fall, real estate executives said.

“It’s one of the most valuable pieces of real estate,” said Shultz, Duke Realty’s Southern California market leader.

Land rush

Amazon clearly is the region’s biggest player, absorbing one-tenth of Southern California’s vacant industrial space in 2020, figures from commercial real estate brokerage Colliers show. The next closest competitor, XPO Logistics, absorbed half that space last year.

But others are vying for last-mile hubs as well. Home improvement chains, furniture outlets, apparel and consumer product providers are all expanding their delivery networks.

Clothing company Americhine, which sells the Band of Gypsies line of Bohemian women’s wear, leased a 170,692-square-foot building in La Palma last fall to handle online sales.

“It’s been amazing to see with the pandemic how many people have shifted to online retail sales,” said Karina Wukelic of Producre Inc., the brokerage that represented Americhine in the deal.

Walmart, which recently launched its new Amazon Prime-style Walmart Plus program, is taking a slightly different approach to meet free-delivery promises. It plans to convert about 100 of its existing stores in two years into mini-fulfillment centers that use automation to gather the products ordered online. Customers will have the option to retrieve those items at new pickup stations or have them delivered.

“Walmart has 4,700 stores, so it has stores within 10 miles of 90% of the U.S. population,” said Walmart spokesperson Camille Dunn. “That’s really a competitive advantage for us when it comes to the last mile.”

Environmental costs

Not everyone is thrilled to see trucking centers proliferate across Southern California.

A proposed logistics center sparked a citizen uprising in Cypress in 2013. Last summer, a community group sued the city of Upland over its decision to approve a 201,000-acre warehouse next to the Cable Airport, reportedly for a new Amazon distribution center.

The suit maintains Upland failed to do an adequate environmental assessment of the proposed warehouse’s impact on traffic and air pollution.

Some neighborhood leaders in the region say increased traffic concerns them as well.

John Bailey, president of the Southeast Torrance Homeowners’ Association, worries about how a new Amazon delivery station in an empty Costco building will affect traffic on Crenshaw and Hawthorne boulevards, especially during rush hour. And where will all those trucks refuel, he asked.

A city report “made it seem the traffic impact is going to be nothing,” Bailey said. “That’s hard to believe.”

A report by the Economic Roundtable found that Amazon’s Inland Empire fulfillment centers have significant environmental impacts while its workforce struggles to make ends meet off wages starting at $15 an hour.

The report found that in 2018, 21,500 truckloads created an estimated $642 million in uncompensated public costs for noise, road wear, accidents and harmful emissions.

Daniel Flaming, an urban planner and the Economic Roundtable’s president, said the new last-mile distribution centers will have negative impacts as well, especially when they’re adjacent to residential neighborhoods. That’s the case for at least three new last-mile hubs.

“It would be horrific if you owned a home next to one of these distribution centers,” Flaming said. “All those loaded trucks have significant road wear issues as well as congestion issues, noise issues and pollution issues.”

Although Amazon operates a massive fleet of carbon-emitting ships, planes and trucks, it’s also a major backer of several environmental initiatives, most notably The Climate Pledge. The company was among the first vowing to be net-zero by 2040.

In June, the company also set aside $2 billion for a new Climate Pledge Fund, investing in companies with products or solutions that will hasten the planet’s transition to a low-carbon economy.

Amazon also announced plans last year to buy 100,000 custom electric delivery vehicles produced by Irvine-based electric truck maker Rivian.

Amazon, which began testing the new vans in Los Angeles in February, plans to have 10,000 Rivians delivering packages to customers by 2022 and all 100,000 by 2030.

“What you see here (is) the future of last-mile delivery,” Ross Rachey, director of Amazon’s Global Fleet and Products, said in a statement last October.

Even many of Amazon’s critics concede they buy products through the e-commerce giant.

Rossmoor neighborhood leader Gary Stewart, who joined the 2013 fight against the Cypress logistics site and worries about the new Amazon site at the former Mitsubishi headquarters, admitted his wife buys goods regularly through the company’s website.

“(Amazon founder Jeff) Bezos put together a killer machine, no doubt about it,” Stewart said. “It runs almost flawlessly for its size.”

The paradox wasn’t lost on Mishurda, the Newport Beach logistics investor.

“Everyone wants that package in two hours,” Mishurda said. “But nobody wants that warehouse in their backyard.”


Photo by Jeff Gritchen, Orange County Register/SCNG: An Amazon “last-mile” delivery station in Mission Viejo, CA, on Wednesday, March 3, 2021. In a mad dash to speed up distribution and keep up with increasing online sales, Amazon tripled its suburban logistics nodes in Southern California from nine to 32 in 2020. The expansion will increase Amazon’s “last-mile” footprint to 5.2 million square feet, nearly quadrupling its space in the region.

Category: orange county, Irvine, Economic Development