Business & Real Estate

New Macy’s site in Sacramento shows rise of e-commerce, logistics as manufacturing wanes

After producing for more than 60 years, Campbell Soup Co. announced in September 2012 that it would close its south Sacramento plant. Macy’s is now moving in to part of it.
After producing for more than 60 years, Campbell Soup Co. announced in September 2012 that it would close its south Sacramento plant. Macy’s is now moving in to part of it. Sacramento Bee file

South Sacramento’s old soup factory is becoming a distribution hub for the modern era, a place to ship goods to consumers who order from their computers.

Macy’s Inc. confirmed Friday that it will open a 175-employee Internet fulfillment center at the former Campbell Soup Co. plant on Franklin Boulevard. The new center, which is being relocated and expanded from an existing facility in West Sacramento, is the latest example of how online retailing is transforming the economy as traditional manufacturing wanes.

Macy’s won’t be the only e-commerce distribution facility at the old Campbell site. An Australian company called Orora Ltd. recently moved in and employs approximately 30 workers who pack and ship fresh food to online consumers in a highly automated setting.

“It really shows the way of the world these days,” said Nate Ellis, leasing manager at Capital Commerce Center, as the Campbell plant is now called.

Macy’s said it had outgrown its West Sacramento facility as its Internet business booms. Across the state, warehouse and logistics centers are becoming an ever-bigger sector of the economy, with companies such as hiring thousands of Californians for state-of-the-art facilities designed to compress delivery times to online consumers.

“Warehouse jobs are one of the areas for big job growth in the state,” said Michael Bernick, a San Francisco labor lawyer and former director of the state Employment Development Department.

About 10,000 Californians have gotten warehouse jobs in the past year, and 58,000 since 2010.

The Macy’s announcement is the biggest coup yet for Hackman Capital Partners, the Southern California real estate firm that led the partnership that bought the Campbell facility in late 2013. The purchase came several months after Campbell closed, erasing 700 high-wage blue-collar factory jobs and adding pain to the working-class Franklin neighborhood.

Now the site is being revived, bit by bit. Macy’s will occupy 385,000 square feet when it opens this summer, or slightly more than one-third of the sprawling Campbell complex. Along with Orora and two other tenants, the site will be roughly 60 percent filled with Macy’s arrival, and Ellis said other deals are in the works.

“We’ve got some good activity,” Ellis said. “There’s a lot of people out kicking the tires.” Some developers have approached Hackman about putting up new buildings on some of the empty land surrounding the plant.

But replacing the full economic might of Campbell, dollar for dollar, is proving tough. The soup plant paid many of its unionized workers in excess of $20 an hour plus benefits, said Terri Carpenter, workforce development manager at the Sacramento Employment and Training Agency.

Carpenter said typical warehouse jobs pay around $15 an hour.

Macy’s spokesman Jim Sluzewski said the new jobs will pay a range that “certainly starts above the minimum wage. ... Your hourly workers can go into the $20 range.” Employees also will receive health care and other benefits, he said.

About 400,000 square feet of space remains unclaimed at the site, Ellis said. About half of that is composed of the original manufacturing space – “the oldest part of the building, built in 1945,” he said.

That space “is more challenging” to fill, Ellis said. While some manufacturers have made inquiries, “there’s not a ton of them as a whole,” he said.

Carpenter said old-line manufacturing like Campbell’s is being phased out or moving overseas. The manufacturing that remains tends to be oriented toward “high-process, highly sophisticated computerized (assembly) lines,” she said.

Such highly automated plants pay a good wage but typically don’t employ lots of workers. All told, factories in California have added 3,000 jobs in the past year. But there are still 200,000 fewer Californians working in manufacturing than before the recession.

It will be difficult for many of the former Campbell workers to find factory jobs without extensive retraining, Carpenter said.

Nonetheless, Sacramento County officials, delighted with the progress Hackman Capital is making at Capital Commerce Center, were more than happy to serve up an incentive package to land Macy’s.

The county is poised to give Macy’s a sales-tax reimbursement of up to 50 percent, depending on employment levels and the volume of sales generated out of the facility. The reimbursement can’t exceed a total of $5 million over the 10-year life of the lease, said Lori Moss, the county’s director of community development.

The incentive package is also contingent on Macy’s meeting certain goals, including investing $10.5 million in capital improvements at the site by the end of 2016.

“It’s a good investment for the county to make,” said Supervisor Patrick Kennedy, whose district includes the site. “It’s a marquee tenant that will show other potential tenants that this is a place to go.”

The incentives must be approved by the Board of Supervisors, which is scheduled to consider them at its Tuesday meeting.

Not all the jobs Macy’s is creating in south Sacramento will be new ones. Some will move from West Sacramento, where the company has outgrown its 92,000-square-foot space on Channel Drive. The retailer scouted various locations in the West, including some outside California. The Capital Commerce location will be four times the size of the West Sacramento site.

With the move, Macy’s will more than double its employment, from 72 workers to the equivalent of 175 full-time jobs. Sluzewski said the West Sacramento workers will be offered a chance to move to the Campbell Soup location.

Sluzewski said the incentives played a role in Macy’s decision to move to Franklin Boulevard, but weren’t the only driver. “Certainly the incentives are an important piece of it – so is the location, so is the workforce availability,” he said. “It’s great to be able to keep it local.”

Macy’s five fulfillment centers across the country, unlike traditional warehouses, don’t ship in bulk to stores. Rather, they deliver individual items to individual consumers, including those who have ordered from home or those who went into the stores and couldn’t find what they wanted in stock.

The expansion in Sacramento comes at the same time Macy’s is building a new Internet fulfillment center in Tulsa; it will be three times the size of the Franklin Boulevard facility. Macy’s won’t say how much of its sales revenue comes from the Internet but says the online business is strong.

“It’s growing very rapidly,” Sluzewski said.

Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

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