When animation and visual effects company Rhythm & Hues Studios Inc. started out 14 years ago in a basement beneath a dental office in Culver City, vacancies were high enough and rents low enough in the area that finding room to grow was hardly a worry.
When the company eventually grew enough to relocate to a larger leased space in Hollywood, it wasn't such a big deal either.
But times have changed. The company is now afraid its next move will take it out of Los Angeles.
As business boomed, choices about where to expand shrank. The firm took an additional 30,000 square-feet of space in North Hollywood. But five years ago after an arduous search that turned up nothing in Hollywood the business moved to Marina del Rey, into 70,000 square feet of industrial space that was hard to find.
"It took us three years before we found this spot in the marina," said John Hughes, the company's president. "No matter where you go, there's just not a lot of available space. There were a few spaces, downtown and in the Valley. But not very many."
It's a story not unique in West L.A.'s booming market.
Countywide the market for industrial space has gotten impossibly tight. Vacancy rates for the entire county in the industrial sector, from Santa Clarita to Ontario, rival the lowest vacancy rates in the Westside office markets. It's widely believed that businesses in need of larger industrial spaces will inevitably be pushed out of L.A.
The high demand for housing has been one culprit as residential developers chase industrial properties that can be rezoned for homes.
Examples of similar encroachments on commercial property are plentiful. One developer turned an old Volkswagen plant in Culver City into a condominium development, and cities as distant as Santa Clarita have gotten interest from housing developers looking to build residential units on land currently zoned for commercial use.
Leslie Munger, a broker with Long Beach-based T.F. Merrick Co. Inc., said it's always a concern when land is taken out of industrial use. She said the kinds of commercial properties that get snapped up most often are smaller spaces that are otherwise ideal for incubating small companies, not unlike the low-cost basement space where Rhythm & Hues started.
Douglas Golden, a broker specializing in industrial property for Charles Dunn Co., said several conditions, including the residential crunch, have contributed to the scarcity of room for light industry around Los Angeles.
In downtown and surrounding areas, many parcels are too small for significant industrial use, Golden said. Many companies are forced to relocate to the east, often as far as the Inland Empire, where they can find as much as 1 million square feet for distribution centers.
But it's not just residential developers who are gobbling up industrial properties. Golden pointed out that Capital Vision Equities is building a commercial development on a 26-acre site at Slauson and Western avenues that used to house an ice cream company, lumber yard and other industrial tenants. Even the Water Garden office building in Santa Monica once was an industrial site.
Golden said vacancy rates for industrial property in West L.A. are in the neighborhood of 2 percent, rivaling vacancy rates for office space in the area.
Vacancies could rise, though, as a result of the dot-com shakeout, as technology businesses that snatched up artsy, open space begin to see venture capital money run out.
Landowner and broker William Feldman, who owns a building next to Rhythm & Hues, fears his tenant, North Hall Productions, where CBS shoots its series "The District," will shutter if a proposed residential rezoning of the site is granted.
Still, Feldman knows the bigger picture is hard to ignore. Less than a mile away, he has nine offers on a commercial property he owns. All but two are from apartment housing developers.
Staff reporter Christopher Keough contributed to this article.
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