Newmark PCG

January 11, 2022

The Green Zones Program defines a sensitive use as any property where people are likely to reside or spend time, such as homes, schools, schoolyards, parks, playgrounds, daycare centers, preschools, and nursing homes. The program stipulates that any property within a 500-foot radius of these sensitive uses must conform to the new rules within three to seven years.

As with any significant zoning ordinance, there are impacts to both new construction projects and existing structures. The financial implications to industrial real estate owners within the affected areas are substantial and, at a minimum, all new and existing facilities would be required to update lighting and HVAC to energy efficient systems.  Businesses would also need to comply with new hours of operations for outdoor activities. Under the proposed ordinance, any outdoor activities, including outdoor truck loading and unloading would be prohibited between 6:00 PM and 8:00 AM.

Newmark Managing Director, Ryan Plummer says, “Even though the cost of new development will increase, industrial real estate values will remain relatively unphased due to rapidly rising rents and increased demand.  While the Green Zones Program has Los Angeles residents’ best interests at heart, it is expected to have a detrimental impact on the existing mom-and-pop businesses that happen to operate near sensitive uses.”

In California, the zoning of a property is either controlled by a city (incorporated territory) or controlled by a county (unincorporated territory). Some laws passed by Los Angeles County are effective countywide; however, Green Zones Districts impact only unincorporated territory. In Los Angeles County, approximately 60% of the land is unincorporated.

The Green Zones Program, as currently proposed, identifies further regulation for the following 11 neighborhoods. Owners of industrial real estate in the Green Zones should be aware of how the new mandates could affect their property.

Avocado Heights South San Jose Hills West Rancho Dominguez-Victoria
East Los Angeles Walnut Park West Whittier-Los Nietos
East Rancho Dominguez West Athens-Westmont Willowbrook
Florence-Firestone West Carson  

The Green Zones Program defines a sensitive use as any property where people are likely to reside or spend time, such as homes, schools, schoolyards, parks, playgrounds, daycare centers, preschools, and nursing homes. The program stipulates that any property within a 500-foot radius of these sensitive uses must conform to the new rules within three to seven years.

What Costs Will Industrial Real Estate Owners Incur from the Green Zones Program?

Industrial real estate owners will be required to comply with several new mandates to existing warehouses. The majority of properties in the affected areas will need to (1) transition to Energy Star HVAC ($25+ PSF) and lighting systems ($18 PSF) and warehouses larger than 100,000 square feet must comply with the Air Quality Management District’s rules on installing electric vehicle charging stations. Property owners will be required to make these changes to their property within five years of the passage of the ordinance (depending on where the property is located). It is anticipated that automobile-related businesses will feel the biggest impact of the new legislation due to the additional requirements, which could include constructing an entirely new building to enclose what was previously an outdoor automobile scrap yard.

Limitations to Business Hours and Operations

One of the most significant, non-construction limitations proposed is the reduced hours of operation for all industrial uses in the affected areas. The proposed ordinance would prohibit outdoor operations between 6:00 PM and 8:00 AM, including truck loading and unloading. Limiting outdoor loading and unloading will likely have a substantial impact on distribution and manufacturing businesses and further increase the amount of trucks on the road during peak traffic hours.

What uses are now prohibited by the Green Zones Program?

The table below shows the prohibited uses in Green Zone Districts. However, a legally established company may continue to operate until the expiration of its conditional use permit. Any nonconforming uses must comply within seven years.  A majority of conditional use permits in Los Angeles County are valid for 10 years, in which case the company would have to comply by the expiration of the permit (not to exceed 20 years for longer, specialized permits).

Acid manufacturing Anaerobic digestion facility Auto dismantling
Cement, lime, gypsum, or plaster Chipping and grinding Combustion or non-combustion biomass conversion facility
Composting facility, except for green waste composting Compressed natural gas manufacturing Construction and demolition facility
Conversion technology facility Distillation of bones Drop hammers
Explosives Forging Works Fertilizer manufacturing
Gas manufacturing Glue manufacturing Inert debris landfills
Inert debris processing facility Materials recovery Metal plating (1,000-foot radius)

Polymer plastics and foam manufacturing Scrap metal yards (outdoor operations) Smelting of tin, copper, zinc, or iron ores
Solid waste landfills Tannery or the curing or storage or raw hides Transfer stations

What Happens if a Sensitive Use is Built Near My Property?

Industrial property owners will be grandfathered into the current zoning related to the location of sensitive uses. A new development of a sensitive use proximate to an existing industrial, recycling, solid waste, or vehicle-related use will not trigger a rezoning or reclassification of the existing businesses in the immediate area. The new construction project will have a duty to protect its inhabitants since it is proximate to a known industrial use. For example, a new apartment building proximate to a warehouse may require a larger setback from the property line, mandatory landscaping, the installation of an air filtration system in the apartments and double-glazed windows.

On September 22nd, 2021, the Los Angeles County Planning Commission unanimously recommended the passage of the Green Zones Program to the Los Angeles County Board of Supervisors. The Board of Supervisors unanimously passed the Green Zones Ordinance on December 21, 2021. In the Newmark Private Capital Group’s estimation, industrial real estate owners in the green zones districts should prepare themselves for significant costs and changes to their business hours. Fortunately, we are confident that industrial real estate values will remain high, providing ample exit opportunities for businesses to capture the value of their land and relocate to a more favorable business environment.

Disclaimer: The information contained in this article is provided for general informational purposes only, and should not be considered or treated as legal or tax advice and represents only general information that may or may not be applicable to the reader’s particular situation. The reader should consult its own attorney and/or tax advisor if specific guidance, information, or advise is required.

About the Author(s)

Authored by Newmark Private Capital Group’s Managing Director Ryan Plummer, Financial Analyst   Jordan Garcia. With insights from Property Management’s Managing Director Gillian Sutton and Newmark’s Geographic Information System division.