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Tuesday, May 24, 2022

FREIGHT—Costs Push Air-Freight Companies Away From LAX

Local air-freight companies, eager to cut costs and unable to find affordable warehouse/distribution space near Los Angeles International Airport, are being forced to relocate to far-off South Bay locations.

That is putting these time-sensitive businesses under tremendous pressure to get their cargo to and from LAX on time. The situation is being exacerbated by the gentrification of LAX-area municipalities, which are increasingly unwilling to allow new freight facilities to be built.

“With airport expansion and with the focus of El Segundo and Hawthorn looking not to lease to freight companies, air-freight companies are being squeezed out of the area,” said Harvey Beeson, an agent with The Klabin Co., a real estate brokerage with offices near LAX and in Torrance.

Recent examples of air-freight companies migrating south include Eagle Global Logistics, Yusen Air & Sea Service, Hellmann Worldwide Logistics Inc. and Air Plus Limited, which have all relocated to Torrance, North Torrance or Rancho Dominguez in the last several months.

Garret Nakai, vice president at TKK-Toyo USA Inc., said that his company was stuck when its sublease in West L.A. expired in late 1999. The freight-forwarding company needed to expand into modest space that it could afford.

“There were some very, very small places and some large places (in the LAX area), but nothing in the 10,000 to 12,000 square feet we needed,” Nakai said.

Nothing, that is, that TKK-Toyo could afford.By leasing 15,800 square feet on Van Ness Avenue in Torrance, the company was able to save 20 cents per foot per month nearly $40,000 a year, said Nakai.Those savings have come with a cost, however.

When TKK-Toyo was located two miles from LAX, company employees would make the runs. Now, the nine-mile trip to the airport takes 90 minutes, Nakai said. Because the company can’t afford to have its workers away for that long at a stretch, it now hires messengers to make the runs which offsets some of the savings from being in cheaper space.

While putting distance between the warehouse and airplanes can be inconvenient, air-freight companies have found new and bigger buildings farther south with side yards for truck turnarounds twice as large as those in the immediate vicinity of the airport.

Tenants have responded by hungrily absorbing warehouse/distribution space in such South Bay and Mid-Cities areas as Torrance, Carson, Compton and Rancho Dominguez.

Pushing a disproportionately large part of the action in Torrance and other such cities are the moratoriums that nearby Hawthorn, El Segundo and Gardena have put on warehouse and distribution facilities.

Relatively cheap rental rates are another factor drawing warehousing/distribution operations into the South Bay and other peripheral markets. Monthly industrial rents in the LAX market are between 80 cents and $1 per foot, Beeson said, while comparable space in the South Bay goes for 55 to 66 cents per foot.

Herb The Losen, general manager at Hellmann Worldwide Logistics, said he has moved with a couple of freight companies to points that once would have been considered too far south of the airport.

“We had to make some adjustments, 30 minutes or so, to (trucking) times, but it was easily accommodated and didn’t affect business,” The Losen said. “It was minor compared to the cost savings.”

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