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RE-INVENTING
THE SUPPLY CHAIN FORMULA
The Tejon Industrial Complex finds a real estate equation that
works.
Lara Rauba
Traditionally, the three most important things in industrial
real estate have been the three L’s: location, location,
location. “Today, that is no longer the case,” says
Barry Hibbard, vice president of commercial and industrial marketing
for the Tejon Ranch Company. “Now, logistics, labor and
location drive that equation.”
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| IKEA has developed a 1.7 million-square-foot facility
at the Tejon Industrial Complex in Kern County, California. |
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The Tejon Industrial Complex has designed its whole strategy
of development around logistics, labor and location. “We
provide our customers with good, solid logistics knowledge about
our area and why it makes sense,” says Hibbard. The 1,450-acre
Tejon Industrial Complex, one of the largest industrial projects
in California, is located in Kern County, approximately 60 miles
north of downtown Los Angeles, near Bakersfield. The project
is being developed by Tejon Ranch Company, which has formed
developmental partnerships with DP Partners of Reno, Nevada,
and San Francisco-based Catellus Development.
The industrial complex is a portion of Tejon Ranch, a 270,000-acre
ranch that also has hunting, mining, oil production and filming
operations, as well as a master-planned community featuring
more than 24,000 homes. The ranch was founded in 1843 by General
Edward Beale, a surveyor who monitored the West Coast for the
United States Army. Construction began on the Tejon Industrial
Complex approximately 3 years ago, with a Petro Travel Plaza
serving as the first major tenant. Petro is a support station
for professional truck drivers, offering them a place to stay
and a place to prepare themselves for the road, says Hibbard.
From there, the Tejon Industrial Complex caught the attention
of major worldwide corporations, including IKEA, the largest
furniture retailer in the world. “IKEA built an 850,000-square-foot
first phase of development and recently finished a second phase
of development,” says Hibbard. “It now has 1.7 million
square feet under one roof, which handles everything from San
Diego to as far north as Vancouver to as far east as Houston.”
Logistics, part of Tejon Ranch Company’s marketing strategy,
was one of the reasons IKEA was attracted to the Tejon Industrial
Complex. “When you look at what it takes to operate a
facility, you will find that 90 to 94 percent of the costs are
involved in logistics and labor,” says Hibbard. “The
other 6 to 10 percent are real estate and utilities. So it’s
funny that so many companies focus on the smallest part of the
equation and negate the other 90 to 94 percent.”
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| The Tejon Industrial Complex provides tenants easy
access to Interstates 40 and 5 as well as a 1-day drive time to many
areas across the West. |
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Labor is also an important part of the real estate strategy
because of its effect on cost efficiency, says Hibbard. Affordable
labor is a critical factor in building a successful company.
“[Kern County] has one of the highest unemployment rates
in the country,” says Hibbard. “Compare us to Northern
California and Southern California — Northern California
is at 5 percent, Southern California is at 6 percent and Kern
County is at 12 percent.” An unemployment rate like that
gives companies locating in Kern County a larger pool of employees
from which to choose, also raising the quality of employees.
“People are literally standing in line for jobs,”
says Hibbard. IKEA had an average of 13 applicants for every
job opening, Petro had eight applicants for every position and
Target had 20, says Hibbard. At one point Target had 10,000
people wrapped around its building during its 3-day job fair,
he adds. Another incentive for companies looking at Tejon Ranch
is the fact that doing business in Kern County will save them
an average of $3.46 per employee per hour in labor costs compared
with the national average, according to national labor statistics
from the U.S. Department of Labor and Kern County’s Employer’s
Training Resource.
Labor is affordable in Kern County because the area still has
a low cost of living. The residents of the county are able to
find quality housing and many of the amenities offered in larger
cities, all for a small-town price. “You can still buy
a nice home for $100,000 in Kern County,” says Hibbard.
“Kids can live in a nice neighborhood. When you look at
the overall trend in America, people are getting back to a focus
on family values. What IKEA and other big retailers have figured
out is that this is a deal that makes sense,” he says.
“Affordable housing, affordable labor, access to huge
numbers of people, affordable real estate. Those things really
add up.”
The final aspect of the real estate equation is location. “The
Inland Empire has been a great market and will continue to be,
but most companies are looking to serve all of California, not
just Southern California,” says Hibbard. “This is
a good location for companies that are bringing their products
in through the ports of Los Angeles/Long Beach, and for companies
who are bringing their products across the country, domestic
products that are coming over Interstate 40.”
Tejon Industrial Complex has good access to Interstates 40 and
5 and offers what most places can’t — a 1-day drive
time. “When you look at a drive-time map, you see the
efficiency of being able to reach more than 34 million people
within a 1-day truck drive,” says Hibbard. “You
can’t do that from Southern California, but you can when
you move up to the middle of the state. We are right on I-5,
the transportation artery for the state, and you can reach both
critical population centers — the Bay area and L.A. Basin
— all in 1 day.” Hibbard also adds that a shorter
drive time raises the quality of drivers, as there is greater
competition for jobs in which drivers can be home with their
families in the evening, instead of being gone for days or weeks
at a time.
Companies such as Wal-Mart, Sears, IKEA and Target have realized
the advantages of locating in the area. Wal-Mart built a 1.3-million-square-foot
distribution center just outside of Kern County; Sears has a
1.3 million square-foot facility in Kern County with plans to
double its current location; IKEA built 1.7 million square feet
of space at Tejon Industrial Complex; and Target located a 1.7
million-square-foot facility in Kern County. “Here is
this place called Kern County, which no one has ever heard of,
except for some of the most supply chain-savvy companies in
the world with 1 million-plus-square-foot buildings,”
says Hibbard. “What I’m thinking, if I’m a
major retailer, is that they know something the rest of us don’t
know yet. I’d ask myself why all of these companies are
located there and why they are doing so well.” Hibbard
believes these companies are successful because of their focus
on solid logistics, affordable labor and a prime location, all
of which are offered at Tejon Industrial Complex.
Over the next 3 to 5 years, Tejon Industrial Complex is planning
to develop an additional 3 million to 5 million square feet.
“One million square feet a year is an aggressive goal,
but I don’t think its unrealistic,” says Hibbard.
“We already have 2.4 million square feet there now. And
we are really just getting started, just getting the momentum
going.” Tejon Ranch has a 600,000-square-foot building
that is already designed and will soon break ground. There is
also an existing 650,000-square-foot building that has gotten
the attention of several companies. “I think you will
see a lot of activity here as people are looking for more efficient,
affordable solutions,” says Hibbard.
©2004 France Publications, Inc. Duplication
or reproduction of this article not permitted without authorization
from France Publications, Inc. For information on reprints of
this article contact Barbara
Sherer at (630) 554-6054.
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