California Warehouse Law 2025: New Regulations, Storage Crisis, and Legal Implications

California's Changing Warehouse Landscape: What Businesses Need to Know

The California warehouse industry stands at a critical juncture with the implementation of Assembly Bill 98 and an impending storage crisis that could affect businesses across the state. Beginning January 1, 2026, new regulations will reshape the warehouse landscape, particularly for facilities exceeding 250,000 square feet. These changes, combined with recent events and market conditions, create a complex environment that business owners and warehouse operators must navigate carefully.

The Changing Landscape of California Warehousing

California's warehouse industry has experienced significant transformations since the pandemic-era storage crisis of 2021-2022. During that period, an unprecedented surge in consumer demand and supply chain disruptions led to severe warehouse shortages. The ports of Los Angeles and Long Beach witnessed countless ships waiting offshore, while inland storage facilities struggled to manage the overflow of goods.

In response to rapid warehouse development, particularly in the Inland Empire, the California legislature passed Assembly Bill 98 in September 2024. This legislation introduces the concept of a "21st century warehouse" and imposes new requirements that will affect both new construction and existing facility expansions.

Understanding Assembly Bill 98's Key Provisions

The new legislation primarily targets larger warehouse facilities and introduces several notable requirements:

Size Threshold: The regulations specifically apply to warehouses of 250,000 square feet or larger, though smaller facilities may also be affected under certain circumstances.

Location Restrictions: New warehouses must maintain a minimum distance of 900 feet from sensitive areas such as schools, residential neighborhoods, and hospitals.

Expansion Limitations: Existing warehouses face restrictions when expanding beyond 20% of their current capacity, particularly if located near sensitive areas.

Environmental Considerations: The legislation emphasizes environmental sustainability, promoting greener building practices and more efficient operations.

The Looming Storage Crisis

Several factors indicate a potential storage crisis on the horizon. The recent Southern California fires will likely generate increased demand for building materials storage, while existing space limitations remain unresolved from previous shortages. This combination suggests businesses should prepare for potential challenges in securing adequate storage space.

Legal Protections for Warehouse Operators

California law provides strong protections for warehouse operators through warehouse liens under Commercial Code 7210. However, these protections depend heavily on proper documentation and procedures.

Essential Documentation Requirements

The warehouse receipt serves as more than just a record of stored goods—it functions as a legal document of title and establishes contractual relationships. Key elements that must be included:

Proper identification of the goods' owner, including precise business entity names and correct legal designations
Clear issuance dates and delivery provisions
Detailed statements of charges, including storage rates and handling fees
Comprehensive descriptions of stored goods, including serial numbers when applicable
Valid signatures with proper authorization documentation

Storage Fee Considerations

Clear documentation of storage fees represents one of the most crucial elements of warehouse agreements. The fee structure should address:

Base storage rates per square foot or unit
Additional handling charges
Special service fees
Rate adjustment provisions
Payment terms and late fee policies

Protecting Your Business Interests

Whether you operate a warehouse or rely on storage facilities for your business, several strategies can help protect your interests:

For Warehouse Operators

Document Everything: Maintain detailed records of all stored goods, including photographs when practical.

Establish Clear Procedures: Create standardized processes for receiving, documenting, and tracking stored items.

Review Insurance Coverage: Ensure adequate protection against potential claims and losses.

Implement Digital Solutions: Use modern inventory management systems to track goods and maintain accurate records.

For Businesses Using Storage Services

Verify Documentation: Review all warehouse receipts and storage agreements thoroughly before signing.

Maintain Communication: Keep open lines of communication with storage facility operators.

Monitor Stored Goods: Regularly inspect and verify the condition of stored items when possible.

Document Condition: Take photographs and maintain records of stored items' condition upon delivery to the facility.

Dispute Resolution Considerations

Storage agreements should clearly outline dispute resolution procedures. Important factors to consider:

Choice of Law: Specify which jurisdiction's laws will govern any disputes.

Venue Selection: Determine whether disputes will be resolved through court litigation, arbitration, or mediation.

Notice Requirements: Establish clear procedures for handling disputes and communications between parties.

Looking Ahead: Industry Implications

The combination of new regulations and market pressures will likely lead to:

Increased Storage Costs: Limited space and stricter building requirements may drive up storage rates.

Operational Changes: Warehouses may need to adapt their procedures to comply with new regulations.

Market Consolidation: Some smaller operators may find it difficult to compete under new requirements.

Conclusion

California's warehouse industry faces significant changes in the coming years. Success in this evolving landscape requires careful attention to legal requirements, thorough documentation, and proactive planning. Whether you operate a warehouse or rely on storage facilities, understanding these changes and implementing appropriate measures will prove crucial for protecting your business interests.

For specific guidance on warehouse regulations or assistance with storage-related legal matters, consulting with knowledgeable legal counsel can help ensure compliance and protect your rights. While this article provides general information, each situation requires individual analysis to determine the best approach for your specific circumstances.