It is no wonder, then, that Southern California is the location favored by investors in industrial real estate. Southern California, with 1.1 billion square feet of warehouse and distribution space, is twice the size of Chicago, the second-largest U.S. market. Unlike some markets, Southern California absorbs most of the new warehouse space as soon as it is built, and vacancy rates remain at 4 percent or lower, according to ProLogis.

Industrial real estate developers and investors who convened in Long Beach on Nov. 29 for the Real Share Industrial West conference said the cost of land and an industry-friendly attitude in local communities are important factors to consider when choosing a site for a distribution center. However, access to ports is the most important factor of all.

John Meyer, senior vice president of acquisitions at AMB Property Corp., estimated that each TEU increase in container volume at a port creates a need for 15 square feet of warehouse space in that region.

With container volume in Los Angeles-Long Beach projected to increase by nearly 1.5 million TEUs this year, industrial real estate developers see a continuing need to build more warehouses and distribution centers. "Southern California always surprises us. It always exceeds what we put into our pro forma," said Richard Pink, managing director of ING Clarion, which provides real estate advisory services to investors.

Ocean carriers are creating an increasing demand for industrial real estate in Southern California with their orders for huge ships that are too large to transit the Panama Canal. Carriers through 2010 will enter into their global fleets more than 250 vessels of 6,000-TEU capacity or greater. About 150 of those ships will range in capacity from 8,000 TEUs to more than 11,000 TEUs. Date: December 11, 2006