Challenge: Wolverine Worldwide is a leading manufacturer and distributor of footwear, including brands such as Hush Puppies, Sperry, Keds and Stride Rite. In order to realize transportation savings and employ a new automation technology, the company needed to consolidate three Midwest distribution centers into a single West Coast facility.
This single site needed to be permitted for the development of a 720,000-square-foot distribution center, with room to expand to 1.4 million square feet if and when Wolverine required the space. This was a challenge, as developers rarely offer a “free option” without a firm commitment as to the timing and scope of expansion.
In addition, Wolverine needed a location that would minimize inbound freight costs, with low operating costs and access to an excellent labor pool.
Strategy: In pre-development planning and preparation for site selection, Colliers confirmed the relevant freight lanes and transportation costs, which showed that Los Angeles/Long Beach and Seattle/Tacoma were equally desirable ports of entry. When the total cost of operations was examined, Phoenix and Las Vegas were viable options as well.
Southern California emerged as the most promising location. It offered excellent proximity to a major customer base, access to a port handling significant volume from Asia and an opportunity to provide improved customer service. However, most areas of Southern California presented high development costs and the dense distribution center development in the area stressed the labor market, which was exacerbated by the construction of four Amazon fulfillment centers.
With these constraints in mind, Colliers identified a suitable site in Beaumont, CA. Located on the eastern edge of the Inland Empire, land costs and permit/impact fees at the Beaumont site were less than half those of other Southern California options.
The site offered excellent access to the ports in Los Angeles and Long Beach, with only a modest drayage penalty compared to competing sites in Perris, CA. In addition, Beaumont boasted better labor availability, lower labor turnover and less wage inflation than other sub-markets within the Inland Empire.
Result: Thanks to Colliers’ real estate and incentive negotiations, Wolverine was able to secure the Beaumont site with superior flexibility for growth. The developer offered a multi-year option on facility expansion at no cost and requiring no obligation for Wolverine to expand.
Lower land costs and the competitive request for proposal process that Colliers orchestrated produced a lease rate 15%–20% below competing properties across a four-state area. In negotiations, occupancy costs were cut by more than $3.5 million over the 10-year lease term, and the annual rental escalation rate was secured at 40% below market. Colliers also negotiated an incentive package exceeding $1.5 million that lowered impact fees and provided a 10-year sales tax rebate to Wolverine on its e-commerce business.
Overall, Wolverine was able to secure a site that enabled the company to expand at its discretion and on its own timeline, reducing risk and avoiding future relocation costs.