Two bills prompted by the Boyle Heights warehouse fire are sitting on Gov. Gavin Newsom’s desk, and both would add new financial requirements for cold storage developers — including multimillion‑dollar contingency funds and steeper penalties for major violations. 

The legislation is aimed at easing future cleanup headaches, with one requiring new cold storage facilities to maintain a contingency fund for emergencies and the other implementing elevated fines for health and safety violations in nonresidential structures. 

But industry leaders warn it could make building new refrigerated facilities in California even harder than it already is.

“What happened in Boyle Heights is terrible and a tragedy, and everything should be done to mitigate the damage that's been done in the communities surrounding and in Boyle Heights,” Commercial Real Estate Development Association of Southern California CEO Tim Jemal said, speaking especially about the legislation on steeper fines. 

“But we also think it's not good policy to push sweeping punitive legislation on facilities across the state who have been otherwise — many have been very good actors and are already complying with a number of legislative and regulatory requirements,” he said.

Cold storage users prefer new buildings, according to Newmark data, and Southern California’s stock is aging. The average existing facility in the Inland Empire was built in 1974. 

The fire in Boyle Heights burned for a week in mid-June, and the removal and cleanup of the burned and rotting contents of the warehouse was completed on Aug. 29. Nearby residents complained of rats and flies descending on the neighborhood, drawn by the smell of decay, and unsuccessfully mounted a campaign to have local officials declare a state of local emergency.

“We cannot change what happened in Boyle Heights, but we can change what happens next,” LA Mayor Karen Bass said in a statement on Senate Bill 716 and Assembly Bill 817. “These bills aim to hold cold storage companies accountable if something goes wrong to ensure communities are protected.”

SB 716, put forth by Sen. María Elena Durazo, would levy higher penalties for violations at large commercial buildings, including cold storage facilities, when major violations occur. AB 817, introduced by Assembly Member Mark Gonzalez, would require new cold storage facilities over 20K SF to create and maintain a contingency fund up to $20M to receive approvals to build.

It would apply only to cold storage facilities in the Boyle Heights community plan area until July 2028, when it would take effect statewide. Both bills are headed to Newsom for approval. 

The bills would likely make it harder to build a new refrigerated warehouse in California than it already is, Provender Partners CEO Neil A. Johnson said. 

“Good news if you own one, right?” he said. 

The market in California is already a challenging one for cold storage providers.

High construction costs mean developers rarely break ground unless the project is preleased or structured as a build‑to‑suit. This year to date, there is just about 600K SF of cold storage space under construction in the Inland Empire. 

The industry is also grappling with the out-migration of businesses from California, including businesses that use cold storage space. Those that need to be in California or Southern California will stay, but those that can leave will do so, Johnson said. 

The high cost of doing business, labor issues such as worker unionization, and a climate that is not as friendly to business as other states have pushed out many cold storage users and will continue to do so, said Johnson, whose company has for roughly 15 years focused exclusively on the sector. 

He highlighted the closure of a JBS meatpacking plant in Riverside that wrapped up earlier this year. The food manufacturing facility is ready to occupy and in a good location, but it hasn’t been backfilled, he said. 

“We don't see that anywhere in the country,” Johnson said. 

“Usually they get gobbled up, but we're seeing the opposite thing happen in California,” he added. 

While the details of the new contingency fund legislation would determine the extent of its impact, it is possible that any effect might be blunted by all the factors that are already present and stifling new construction, Green Street Head of U.S. Industrial Research Vince Tibone said.

“I honestly don't think it's going to have much of an impact,” he said. “I don't think there's much development happening right now in California, but it's certainly going to add costs and roadblocks to adding more and more supply over time.”