Developer Finding Niche for Small Industrial Spaces

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As the industrial market has boomed in the San Gabriel Valley, so has construction of big-box warehouse and distribution facilities, leaving smaller entrepreneurs with few options.

The vacancy factor for buildings under 50,000 square feet stands at only 4.5 percent. So two San Gabriel Valley projects currently under way, in Pomona and La Puente, are targeting that niche.

“If you look for quality 15,000- to 40,000-square-foot space with reasonable clear heights, it’s slim pickings,” said David Prior, president of the Klabin Co., noting the phenomenon is true throughout the L.A. area. “It’s a niche being ignored by major developers. (Developing smaller spaces) is something that has to be (done) by local entrepreneurial developers. Not everyone needs or wants large spaces.”

As a result, Burke Real Estate Group of Santa Ana last week purchased a 10-acre site in the 2200 block of Pomona Boulevard, where it plans to break ground this week on a $13.5 million industrial project, said Chris Bonney of Lee & Associates.

The site was previously occupied by General Dynamics, which was Pomona’s largest employer before it moved away about four years ago, Bonney said. The Department of Defense, which owned the property, turned it over to the city of Pomona, which in turn sold it in several pieces.

Burke plans to develop 10 freestanding buildings there, ranging in size from 10,000 to 30,000 square feet for a total building area of 190,000 square feet.

The property is separate from the actual General Dynamics facility, which was sold to furniture manufacturers Boyd Furniture and Tech Systems Group, said Bonney, who along with Steve Shatafian represented Burke.

Burke’s proposed buildings will target smaller warehousing operations and manufacturers, including import-export operations and tech companies prevalent in the eastern San Gabriel Valley. A nine-building project in La Puente that Burke is completing has already sold out.

“They do see that as a niche that isn’t being properly served,” Bonney said. “The larger companies you read about expanding are just one component of the market. A lot of smaller companies just below the radar screen are experiencing growth and need space too.”

Lewis Co. is also tapping the market for smaller, user-owned buildings, with a $12.5 million project consisting of eight R & D;, flex industrial buildings in La Puente. Lewis acquired the site on Valley Boulevard from General Telephone last year, said company President John Lewis.

“It’s an entrepreneurial market because of the Asian predominance in the area and also a lot of R & D;, which generally starts in smaller buildings,” Lewis said.

Both the Burke and Lewis buildings will be available for sale, because a lot of the Chinese-owned businesses in the area prefer to own their own buildings. “They’re seeing rents escalate and they want to protect themselves,” Bonney said.

New Beginnings

After a brief lull, there’s been another spate of job-hopping among real estate pros at companies large and small. Of note:

– Steve Silk and Jay Borzi, formerly top producers at Cushman & Wakefield, joined L.A.-based Secured Capital Corp. as senior managing directors and principals. The two have completed more than $3.5 billion in office, industrial and retail transactions over the past four years alone.

Silk said they left Cushman & Wakefield because Secured Capital is “a smaller, boutique firm.” The real estate investment bank specializes in everything from institutional property sales to large property financings to raising capital.

– Michael Zietsman, who spent 17 years with Jones Lang Wootton (now known as Jones Lang LaSalle), has joined Lehman Brothers, along with two other former managing directors from JLL.

The three new Lehman managing directors are leading expansion of the firm’s real estate asset sales, financing and joint-venture financing activities. Zietsman is based in downtown L.A., while the other two are in Chicago and New York, respectively.

Zietsman was running the Western region for JLL in investment sales, finance and investment banking. Except for a stint in Tokyo in the early 1990s, the South African native has been in Los Angeles since 1983.

– Julie Kleinick, who was director of acquisitions and leasing at Albert Sweet Development in Hollywood, has moved to another Hollywood-based entrepreneurial real estate firm: CIM Group.

Kleinick is director of property management for CIM’s 2 million-square-foot portfolio. She was with Albert Sweet for four years and with another major Hollywood commercial real estate player, M & S; Management, before that.

CIM’s properties blend street-level retail with office and live-work lofts and are scattered from Hollywood to Old Pasadena to Santa Monica’s Third Street Promenade to downtown Brea and San Diego.

“It’s a different portfolio, which made it appealing,” Kleinick said. “I got to keep my stake in Hollywood and I got to branch out to other areas.”

Propaganda Gets New Digs

Propaganda Films signed a 10-year lease valued at $8 million for a 30,000-square-foot building at 1741 N. Ivar Ave. in the heart of Hollywood.

The independent production company plans to consolidate its four existing Hollywood locations in early fall, following a complete renovation of the two-story Ivar building. The new quarters will have offices, production suites, editing bays and a state-of-the-art screening room.

Mark Robinson, Arlene Sommer and Robert Caviola of Julien J. Studley Inc. represented Propaganda. Landlord Meringoff Equities was represented in-house by Rob Langer.

Apartment Deal

Archstone Communities Trust has made its second significant apartment purchase in recent weeks. The latest is a $19 million acquisition of the 172-unit Polynesian Village in Playa del Rey.

The five-acre property, at 8700 Pershing Drive, is close to both Playa Vista and the ocean, said Randy Kirshner of Renaissance Realty Advisors, who represented the buyer and seller, Polynesian Associates.

“They paid the price because of the entitlements that come with the land that entitle them to build a larger complex,” Kirshner said.

Archstone also picked up the 450-unit Studio Colony Apartments last month for $58.5 million.

Elizabeth Hayes can be reached at (323) 549-5225, ext. 229, or at [email protected].

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