Development Magazine Summer 2015

Development - Ownership

I-215 Logistics Center: From Spec Logistics to Amazon Fulfillment Center

The southeast corner of I-215 Logistics Center features ample employee parking as well as a stormwater collection system and drought-resistant landscaping. Photos courtesy of Trammell Crow Company

NAIOP’s inaugural e-commerce building of the year demonstrates how a flexible design enabled Trammell Crow Company to transform what began as a speculative warehouse into a fulfillment center in California’s Inland Empire.   

THE VISION FOR I-215 Logistics Center started in 2011 with 75 acres of raw land in Moreno Valley, California. Although very few speculative industrial projects were launching at the time, Trammell Crow Company (TCC) saw a unique opportunity. The Inland Empire was experiencing tremendous positive net absorption, but developers were not yet building new product.  

Three things made the site attractive: its size, which was big enough to accept a facility larger than 1 million square feet; its existing entitlements, which increased speed to market; and its outstanding location, in close proximity to the freeway and large, established corporate tenants nearby. CBRE marketed the site and ultimately selected TCC as the most qualified buyer and developer. TCC brought the opportunity to longtime joint venture partner Clarion Partners and, after months of due diligence and initial planning, the partners purchased the land in December 2011. TCC and Clarion Partners, in conjunction with construction lender Wells Fargo & Co., collectively decided to do something that no other group in the region was doing: build a 1.25 million-square-foot warehouse entirely on a speculative basis, without any preleasing or direct tenant activity. That potentially risky decision paid off when Amazon.com Inc. agreed to lease the facility in fall 2013, even before construction was completed.

exterior view of an industrial building

The main entrance to the Amazon fulfillment center provides clear directional signage and crosswalks.

Planning and Approvals, Part One 

The City of Moreno Valley partnered with Trammell Crow Company to utilize the existing environmental impact report (EIR), which provided entitlements for approximately 1.8 million square feet of industrial development on the property. TCC obtained an initial amended plot plan, which incorporated upgraded design changes for the spec project, during the due diligence process.

Design Challenges

I-215 Logistics Center was planned with innovative features designed to make it attractive to tenants in search of a best-in-class product, while still allowing for maximum flexibility to meet the demands of the ultimate end user. The design team aimed to satisfy a broad spectrum of client site and building requirements with an extremely efficient site plan and advanced building specifications. Early on, the team made the important decision to phase construction of the 75-acre site, beginning with a 55-acre parcel followed by a 20-acre parcel.

TCC incorporated flexibility into the site plan by allowing the second-phase, 20-acre parcel to be developed in one of three ways: as a potential expansion of the original building, to approximately 1.7 million square feet; as a second, 450,000-square-foot building; or as additional car or trailer parking. Amazon ultimately ended up needing the 20 acres to construct an additional 2,500 auto parking stalls and 300 trailer stalls.

exterior view of truck storage

Walls around the facility’s truck trailer storage yard separate trucks and cars. The building’s corners (including the west entry, at the southwest corner of the building, shown at right) and main entry feature aluminum soffits and insulated, energy-efficient glass.

Key design innovations included separation of truck circulation from autos, truck queuing, a significantly upgraded security system, an above-market tenant improvement package and climate control features. Specialized features include 32-foot minimum clear height, 60 by 52-foot column spacing, a seven-inch level floor slab, multiple points of entry for trucks and employee autos, and above standard capacity for additional auto and truck parking — all of which were needed by Amazon.

In contrast to the traditional industry standard for large warehouses in Southern California of a 0.5 (one-half) percent slope, TCC elected to construct the project with a level floor. By eliminating the slope — which would have been the equivalent of eight feet of fall from the east to the west side of the building’s 1,700-foot length — TCC aimed to attract users with complicated material handling and conveyance systems. In addition, a seven-inch floor slab was incorporated into the original specifications to accommodate anticipated changes to the building code, due to seismic forces affecting racks, and to provide additional support for future fulfillment center material handling equipment. Specialized floor curing materials were also utilized, at a substantial premium to commonly used concrete slab sealers.

As noted above, the natural site slope of more than 1 percent made it difficult for TCC to provide a level floor slab. The development team ultimately found a unique grading solution that involved constructing approximately 3,000 feet of continuous trench drains to build a level building pad and a nearly level truck court on both sides of the building. This solution also minimized the amount of soil that had to be imported, eliminating the need for over 200,000 cubic yards of soil and saving the project more than $1.5 million.

exterior view of an industrial building

The roof design included two additional pounds of design load per square foot to strengthen the roof framing for potential future uses such as conditioned space, the installation of a rooftop photovoltaic system or to allow a fulfillment center tenant to hang material handling equipment from the roof structure.

The project required unparalleled coordination among the development team, Amazon, the city of Moreno Valley and county and state authorities to enable TCC to meet design and contractual obligations. Amazon’s tight schedule was challenging, as were the project’s design and regulatory requirements. 

aerial view of a distribution facility

This aerial view of the completed Amazon I-215 Logistics Center shows the massive 1.25 million-square-foot structure as well as its 20 acres of auto, truck and trailer parking.

Financing

TCC and Clarion Partners faced a major hurdle in securing construction financing for a large speculative project in late 2011 and 2012. At the time, few lenders were willing to take on the risk associated with this type of project. TCC led the search for a construction lender and ultimately found a willing lender and partner in Wells Fargo. After extensive due diligence, the owners secured a construction loan from Wells Fargo, and the project broke ground in September 2012.

Marketing and Leasing 

TCC and Clarion Partners selected CBRE’s Ontario, California, office to market and lease I-215 Logistics Center. After responding to lease and purchase proposals from several outstanding corporate tenants, TCC finally found a perfect fit with Amazon.com. TCC and Clarion Partners made an aggressive decision to hold out and wait for just the right tenant, even halting shell construction during lease negotiations with Amazon.

The primary lease negotiation challenge was that the building needed a very complicated and expensive tenant buildout within an extremely tight timeframe that had to coincide with the peak holiday selling season. To accommodate the difficult schedule, TCC and Amazon worked collaboratively to establish a risk-mitigated approach to commence tenant improvement design, order items with long lead times such as steel, and resolve any entitlement-related issues — all prior to lease execution. 

a table with a list of items

Planning and Approvals, Part Two

TCC obtained a second amended plot plan, incorporating Amazon’s requirements, in September 2013. Both this and the earlier plan approval were the result of significant investments of time by city staff and various utility providers. In order to adhere to the tenant’s schedule, TCC coordinated rapid approvals from government agencies by ensuring that various project elements, including the size of the building, number of vehicles using the project and number of truck doors, did not exceed the original entitlements. Revisions to the project exterior also were extensively researched and coordinated with the city to maintain community standards and expectations. 

TCC’s business plan was centered on the market recovery from the 2008 recession; it expected large, global companies with excellent credit to be the first to recover. Ultimately, demand for I-215 Logistics Center exceeded expectations. The project also helped solidify Moreno Valley and the I-215 Freeway corridor as a viable and robust submarket in the Inland Empire. 

Ongoing Operations

While Amazon’s operations are proprietary and confidential, the e-commerce giant’s October 2013 press release stated that the fulfillment center would create more than 1,000 new full-time jobs. Those employees now pick, pack and ship small items like books, electronics and other consumer goods directly to customers from the facility, Amazon’s fourth fulfillment center in California. 

From the Archives: Development Ownership Articles from the Previous Issue

exterior view of office tower

Real Estate Takes Its Place as the Fourth Asset Class 

When and why commercial real estate joined stocks, bonds and cash.

exterior view of medical office building at night

Enhancing the Health Care Bottom Line With Leased Facilities 

New health care delivery and revenue models are having significant impacts on how and where new health care facilities are planned, developed, owned and operated.