AB 98: How to Navigate California’s New Logistics Regulations

Recent insights from a California Business Properties Association (CBPA) Webinar and an AIR CRE Town Hall have shed light on AB 98, a new California law imposing extensive regulations on logistics and manufacturing facilities. This article highlights the key provisions and their implications for building owners in the commercial real estate sector.

OVERVIEW OF AB 98

Effective January 1, 2025, AB 98 establishes rigorous standards for the development, design, and operation of logistics and certain manufacturing facilities. The law focuses on reducing environmental impacts, especially on sensitive receptors, and integrating sustainable building and operational practices.

WHAT ARE SENSITIVE RECEPTORS?

Sensitive receptors include:

• Residences
  Schools (preschool through high school)
• Daycares
• Public parks, playgrounds, and recreational areas primarily used by children
• Nursing homes and related facilities
• Hospitals

Key Provisions

1. Location and Setback Requirements

Starting January 1, 2026:

• Facilities Over 250,000 sf: Truck loading bays must be located at least 500 feet from sensitive receptors.
• Facilities Under 250,000 sf: A reduced setback of 300 feet applies.
• All logistics developments must prioritize sites that minimize adverse impacts on residential communities and use roadways suited for commercial traffic.

2. Buffering, Screening, and Design Standards

Facilities within 900 feet of sensitive receptors must:

• Include buffers such as walls and landscaping to mitigate noise and light impacts.
• Implement advanced warehouse design elements, including photovoltaic systems, cool roofing, and electric vehicle (EV) infrastructure (charging stations, medium/heavy-duty vehicle readiness, and battery storage).
• Comply with California’s energy efficiency and green building standards under Title 24 of the California Code of Regulations.

3. Truck Routing Restrictions

• Starting January 1, 2026: Operators must submit truck routing plans that limit heavy trucks near sensitive receptors and residential areas.
• By 2028: Cities and counties must update circulation plans to designate truck routes that prioritize highways and reduce residential impacts.

Enforcement: Non-compliance may result in fines of up to $50,000 per six-month period, enforced by the Attorney General.

4. Housing Replacement Mandates

• Developers must replace any residential units demolished on industrially repurposed land with two affordable housing units for every unit demolished within the past 10 years.

5. Zoning Constraints

• Logistics facilities are restricted to industrial-zoned land.
• Rezoning near sensitive receptors requires meeting additional environmental and traffic mitigation standards.

Implications for Building Owners

For building owners, AB 98 introduces several challenges:

• Higher Compliance Costs: New requirements for setbacks, design, and truck routing will increase costs for both new developments and expansions.
• Restricted Development Opportunities: The need to maintain large setbacks and avoid sensitive receptors may limit viable locations for logistics projects.
• Operational Adjustments: Truck routing restrictions require investments in sustainable and efficient logistics plans, potentially increasing transportation expenses.
• Housing Replacement Obligations: Affordable housing mandates add financial and regulatory hurdles for owners developing industrial sites.
• Risk of Relocation: As compliance costs rise, some businesses may relocate operations to neighboring states, impacting demand for logistics spaces in California. Building owners must carefully evaluate the long-term viability of logistics projects under this new regulatory framework.

Moving Forward

AB 98 represents a significant shift in how logistics facilities will be developed and operated in California. For building owners, understanding the law’s provisions and aligning property strategies with its requirements is essential. Engaging with legal experts and staying informed about potential amendments or clarifications will be critical as the industry adapts to this new landscape.