Downturn Dampens Activity Along Alameda Corridor
By DANNY KING
The $2.4 billion Alameda Corridor project, long heralded as a major turning point for L.A.’s economy, is heading towards a lukewarm debut in April.
There has been some corridor-related development in recent months along the southern end, especially near Carson. But activity elsewhere has been slow.
The timing could hardly be worse for completion of the 20-mile-long high-speed corridor that links local seaports with downtown-area warehouses.
Cargo container volume through the L.A. and Long Beach ports has been essentially flat through October, compared with the like period last year. Meanwhile, expectations of increased demand for industrial properties near the corridor have failed to materialize.
“We’re in a down market Businesses are contracting,” said David Freytag, a central L.A. industrial broker at Daum Commercial Real Estate Services. “If times were better, (the corridor’s expected catalytic effect) may be true, but I don’t see things changing that severely because of the corridor being completed.”
Some brokers even say that the corridor has been an impediment to attracting tenants to the area.
“We’re dealing with a construction zone,” said Frank Colonna, owner of Colonna and Co. real estate brokerage firm in Long Beach. “That’s always difficult when you’re showing space to prospective businesses.”
The biggest setback has been the recession, which has hit especially hard Mid-Cities industrial areas like Vernon and Huntington Park. Closures of meatpacking plants and big layoffs at garment companies have shrunk the presence of industries that traditionally have been strong in communities along the northern part of the corridor.
The Mid-Cities industrial vacancy rate jumped to 7.6 percent at the end of the third quarter, up from 5.5 percent a year earlier, according to Grubb & Ellis Co.
As a result, the area surrounding the corridor’s greatest engineering feat a 10-mile-long, 33-foot-deep railway trench spanning the northern and central sections of the corridor is least likely to feel the positive effects on nearby property values.
Carson has seen most of the activity so far.
Hewson Co. of Sylmar bought 20 acres of corridor-adjacent property last December to construct two buildings with a combined 400,000 feet of industrial space.
“We were lucky,” said Scott Sheridan, a Hewson senior vice president. “When we saw the property, we felt it was strategically located.”
The first building, with 250,000 square feet, was just recently completed. It was leased almost immediately after Hewson’s land purchase to Nova CFS Co.
Hewson is in negotiations to sell the second structure, a 150,000-square-foot building slated for completion in March, to P & O; Cold Logistics, which already has entered into a ground-lease on the underlying dirt.
In describing the deals, Sheridan said, “People saw that we were well located adjacent to the corridor, and that they would increase their efficiencies going to and from the port.”
Nearby, at the Watson Corporate Center, Watson Land Co. is putting the finishing touches on a 177,000-square-foot spec industrial building, which it expects to have fully leased within six months.
“Overall, the economic fundamentals that underpin demand are still strong,” said Kirk Johnson, Watson Land’s vice president of real estate operations. “The container imports are still at an all-time high.”
Watson Land owns three industrial parks totaling 10.5 million square feet of space within a mile of the corridor, with almost all of that space being in Carson. “We use the Alameda Corridor for marketing all three of our master plans,” said Johnson.
And despite the current downturn, the corridor’s central and northern stretches will likely see the economic ripple effects in due course. “Remember, this is a massive multi-year, multibillion-dollar project,” Johnson said. “It’s going take some time to assimilate into the (new) supply chain management patterns.”