High prices, aging facilities and a shortage of large industrial spaces in the San Fernando Valley are driving manufacturing and distribution companies north to Valencia.
“We have seen a major migration trend of San Fernando Valley users,” said Craig Peters, senior vice president at CB Commercial Real Estate Group Inc. in Sherman Oaks.
In one of the most recent migrations, TA Mfg. Co., a division of Bellevue, Wash.-based Esterline Technologies Corp. that makes aerospace components for jet engines, is moving its 250-employee operation from Glendale into a 90,000-square-foot facility built for the company in the Valencia Commerce Center this June.
TA Mfg.’s relocation comes on the heels of similar northward moves by Warner Bros., which strayed from its studio location in Burbank to lease 8,500 square feet of production storage facilities in the area. In addition, Harte-Hanks Communications, publishers of the Pennysaver and other direct-mail materials, moved from the city of San Fernando into a 135,000-square-foot facility it bought several months ago.
“I looked for two years for a suitable building or acreage (in the Valley),” said George Jones, president of TA Mfg.
Jones said that even if he were able to find an adequate site within the city boundaries, he would have had to pay about $16 a square foot. “I was able to get (land in Valencia) for $8.50,” he said.
Such bargains, however, are going fast. In the past year, prices for industrial properties in Valencia have increased to about $11.50 per square foot.
Price is not the only factor driving companies north. Many firms also are finding that the facilities include upgrades impossible to find in Los Angeles.
Buildings in Valencia, for example, tend to have 30-foot ceilings for warehousing and distribution operations, as opposed to just 14 to 18 feet in older San Fernando Valley facilities. They also include such features as high-capacity fire sprinkler systems unavailable in L.A.; an abundance of loading doors for easy access; and electrical systems outfitted for higher capacity.
“The buildings we’re building are going to be highly flexible so we can fit a lot of industrial and manufacturing uses into them,” said Dave Mgrublian, managing director of L.A.-based Investment Development Services Inc., which is developing several projects in the area.
Demand for state-of-the-art industrial space pushed Valencia’s industrial vacancy rate to a low 1.9 percent in the fourth quarter of 1997, according to CB Commercial. And a new wave of development will put 60 acres, or 1.2 million square feet, of prime industrial space on the market.
“There are no available buildings and there is such demand that spec buildings have been moving,” said Barbara Emmons, first vice president of CB Commercial in Glendale.
Los Angeles-based EJM Development Co., for example, plans to complete construction on two buildings, one 113,980 square feet and another 86,970 square feet, within the next few months. The company also has begun construction on two more buildings on an additional 10.87-acre lot.
EJM has not yet signed any tenants for the buildings, but “we’ve had good activity,” said Bret Mackay, director of industrial development at the company.
Investment Development Services, meanwhile, plans to break ground on a $40 million project at the end of April. Two buildings, one 152,070 square feet and another 167,572 square feet, should be completed by the end of the year.
And in July, the company said it expects to close escrow on two more properties, a 188,865-square-foot building and another 233,274-square-foot building. These, too, will be constructed on spec, but the developers are not concerned about any potential lack of tenants.
Such projects all of which will be placed within the new, 12 million-square-foot Valencia Commerce Center mark the area’s second wave of industrial development. Newhall Land & Farming Co. , which owns the bulk of the land in the region, began developing the area in 1965, when it broke ground on the sprawling 9 million-square-foot Valencia Industrial Center.
That development has been largely built out since about 1990. Clifford Cos., a Newport Beach-based developer, earlier this month broke ground on one of the property’s last remaining parcels of undeveloped land, an 8.4-acre parcel that will have 12 industrial buildings ranging in size from 8,800 square feet to 35,688 square feet, said Peters of CB Commercial.
The new development activity marks a turnaround for Newhall, which was unable to attract developers north during the early 1990s, when the recession led many manufacturers to close shop or flee Los Angeles altogether.
Now with the economy on the rebound, many Valley firms looking to expand their operations are finding Valencia an attractive alternative.
Indeed, employers say that they can keep the majority of their work force when they relocate north because the reverse commute from the San Fernando Valley takes 20-35 minutes.
At Remo, which had been in North Hollywood for 30 years before moving to Valencia, “96 percent to 97 percent of our workforce came with us,” said Doug Sink, the firm’s chief financial officer.
Jones of TA Mfg., said he expects to lose about 10 percent of his workforce in the move, most of them unskilled employees who don’t own cars, because mass transit service from Valencia to the Valley is not widely available.
“It’s a growing area that’s gaining acceptance,” said Jim Linn, vice president of the industrial service group at Grubb & Ellis Co. in Sherman Oaks.