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Region Showing Signs of Running Short of Space for Business Expansions

The pace of major business expansions in L.A. County has slowed so far this year, highlighting both the uncertain economic outlook and a shortage of land to build on.


For the first five months of 2005, 58 major expansions occurred representing $501 million in investments, according to figures compiled by the Los Angeles County Economic Development Corp. That’s down from 61 expansions worth $551 million for the like period a year earlier.


Total square footage of the expansions fell to 4.8 million square feet from 5.2 million in January through May 2004.


The LAEDC tracks industrial, office or warehouse leases or building permits of at least 20,000 square feet, or $1 million in value. Retail expansions are not included.


“First and foremost, this is a sign that the L.A. County area is running out of land for major business expansions,” said Jack Kyser, the LAEDC’s chief economist. “Even the San Gabriel Valley, which long has touted its available space, is now feeling this.”


Kyser said the data may also signal that business owners are less confident in the future direction of the local economy. Years of anemic job growth, rising home prices and, most recently, higher energy costs are making businesses less willing to commit major resources.


In the past 18 months or so, Kyser said, the expansions have been getting smaller. In all of 2004, the number of major business expansions jumped 17 percent to 178. But the total square footage of these expansions fell to 15 million square feet from 24 million in 2003. And the amount invested in these deals fell 31 percent, to $1.1 billion from $1.6 billion.


Among the 58 firms that expanded or built new facilities this year are toy wholesaler OKK Trading Inc., plastic bottle manufacturer Mayfair Plastics, law firm Quinn Emanuel Urquhart Oliver & Hedges LLP and iHerb Inc., an online nutritional supplement retailer. Several new facilities were in downtown L.A., with others in sites ranging from Chatsworth to Carson to Irwindale.


Until recently, the largest warehouse and distribution expansions were taking place in the Inland Empire. But LAEDC figures show that this, too, may be nearing an end.


There, the number of major expansions fell to 37 in 2004 from 39 in 2003, while the square footage added fell to 6.9 million from 8.6 million.


It’s not just the raw land that’s disappearing. Driven by the need for more tax dollars, cities have been far more willing to approve retail projects than industrial or office buildings. Under Proposition 13, passed in 1978, cities get direct tax revenue streams when retail projects are built in their area, while income from industrial and residential projects is indirect.

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.
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