California’s Assembly Bill 98: Impacts on Industrial Real Estate and Logistics
California’s Assembly Bill 98 (AB 98), signed into law on September 29, 2024, introduces significant changes to the design, construction, and operation of industrial and logistics facilities. The legislation aims to align industrial activities with the state’s ambitious decarbonization and sustainability objectives while addressing environmental and community health concerns. This report outlines the key provisions of AB 98 and their implications for stakeholders in the industrial real estate sector.
Overview of AB 98
AB 98 establishes mandatory standards for operational carbon reduction in industrial and logistics facilities, applicable to new developments and expansions starting January 1, 2026. Cities and counties must align their truck route planning and zoning regulations by January 2028. The bill builds on existing frameworks, such as the South Coast Air Quality Management District’s WAIRE Program, and introduces new requirements tailored to high-density warehouse regions.
Key objectives include reducing greenhouse gas emissions, mitigating air pollution, and integrating sustainable practices into industrial development.
Key Provisions and Requirements
Energy Efficiency and Electrification
Industrial buildings must adopt all-electric systems for HVAC, water heating, and critical infrastructure to meet zero-emission standards.
Enhanced energy performance requirements necessitate the installation of solar photovoltaic (PV) systems, battery storage, and advanced building automation technologies.
Warehouses over 250,000 square feet must comply with Tier 1 standards, including:
Microgrid-ready switchgear
50% of parking spaces are equipped with EV infrastructure and 10% with installed chargers.
Electric Vehicle (EV) Infrastructure
AB 98 mandates the pre-installation of conduit and infrastructure to support EV charging in 50% of parking spaces, with a minimum of 10% equipped with functional chargers.
These provisions aim to facilitate the transition to electric fleets and reduce emissions from logistics operations.
Zero-Emissions Equipment
Transition plans for forklifts and other equipment are required, with the expectation that all feasible operations will transition to zero-emission alternatives by January 1, 2030.
SSA Marine large capacity Wiggins electric forklift in use at the Port of Stockton and the Port of West Sacramento.
Regional Focus and Community Protections
High-Concentration Warehouse Areas
Regions such as Riverside and San Bernardino counties, known for their dense warehouse activity, are subject to stricter standards:
Air quality monitoring systems will be deployed, and reports on pollution impacts must be submitted in 2028 and 2033.
Cities and counties in these regions must update truck routes by 2026 to reduce community exposure to logistics-related emissions.
Increased Protection for Sensitive Receptors (Nearby Communities)
The bill aims to reduce the environmental and health impact on sensitive receptors, such as residential areas, schools, and hospitals:
Buffers and screening, including walls and landscaping, are required to separate logistics operations from sensitive receptors.
Loading bays must be positioned at least 300–500 feet from property lines, depending on the development type.
Diesel truck idling is prohibited and must use plug-in capabilities at loading bays.
Air Quality Monitoring and Impact Analysis
Mobile air monitoring systems will be deployed to measure air pollution in Riverside and San Bernardino counties (warehouse-concentration regions).
Reports on the environmental impact will be submitted to the state by 2028 and 2033.
A data visualization shows the average concentration of PM2.5 particulate pollution in the Los Angeles region from 2000 to 2018, along with the locations of nearly 11,000 warehouses. Darker red indicates higher concentration of these toxic particles; small black circles represent warehouse locations. Credit: NASA Earth Observatory
Regulations on New Developments
AB 98 imposes restrictions to ensure that new logistics projects align with land-use planning and environmental priorities:
Warehouses must be located in zones appropriate for heavy truck traffic, such as arterial roads, thoroughfares, and commercial zones.
Projects on non-industrial land face additional scrutiny, requiring enhanced entitlement processes and community safeguards.
Housing Impact Mitigation
In cases where logistics projects lead to the demolition of residential units, AB 98 includes housing replacement and tenant protection measures:
Developers must replace demolished housing units with two new affordable units within the same jurisdiction.
Tenants displaced by such projects are entitled to 12 months’ rent compensation.
Community Input and Enforcement
AB 98 emphasizes community engagement and regulatory enforcement:
Public input is required for decisions on how penalties from environmental violations are spent.
The Attorney General may impose fines of up to $50,000 every six months on cities or counties that fail to update truck routes or comply with other standards.
Grandfathering of Existing Projects
Projects already in development or those that entered the entitlement process by September 30, 2024, are exempt from the new requirements under AB 98.
Operational and Compliance Considerations
AB 98 introduces significant compliance challenges for developers and operators of industrial facilities. These include the upfront costs of implementing electrification measures, renewable energy systems, and EV infrastructure, as well as potential delays caused by additional entitlement processes. However, the legislation also offers opportunities to enhance asset value through sustainability-focused investments, reduced operational costs, and alignment with growing stakeholder expectations around environmental responsibility.
For organizations navigating these changes, proactive engagement with experienced consultants is critical. A clear understanding of the regulatory landscape and a strategic approach to integrating AB 98 requirements can help mitigate risks and optimize long-term outcomes.
AB 98 Conclusion
AB 98 represents a major shift in California's industrial building and logistics development. By setting new benchmarks for sustainability initiatives and community protection, the legislation underscores the importance of aligning development practices with environmental objectives.
To remain competitive in this evolving regulatory environment, stakeholders in the industrial real estate sector should assess the implications of these standards and prioritize strategic compliance.
Need help navigating AB 98? Contact our team at hello@gaiadevelopment.com.
Related Articles
