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Thursday, Mar 28, 2024

PARKING—Zelman to Build Parking Lot Instead of Industrial Park

Due to an apparent softening of the market for industrial projects, Zelman Development Co. has scrapped plans to build a 630,000-square-foot industrial park on land in Burbank formerly owned by Lockheed Martin Corp. Ben Reiling, president of the Los Angeles-based company, said he will hold off on building the industrial park until the market for industrial space improves. Instead, he plans to put in a public parking garage to serve the Burbank airport. Zelman is proposing a single-story, 3,732-space parking structure on the 30-acre A-1 North property on Empire Avenue between Hollywood and Airport ways. “The market is certainly beginning to slow down for industrial-related projects, and that’s tied to what’s happening with the economy right now,” Reiling said. “So we started exploring other uses for the property that would not be so speculative.” Although, across the Valley industrial vacancy rates have remained on the tight side at between 3.5 and 4 percent, lenders are skittish. Because of the downturn in the economy over the last year, they are being particularly careful about funding industrial projects, especially larger ones, like Zelman’s. California’s tanked dot-com sector, coupled with the fallout from the energy crisis, are sending up red flags to lenders across the country, also making funding for projects difficult to secure. “There is a slowing, but it’s really hitting certain segments of the market,” said Greg Barsamian, a broker with CB Richard Ellis. “Lenders are very gun shy right now because of what’s happened over the last year with the economy and particularly the problems California has had. And, the other angle is that they are particularly taking their time on the larger projects, or those buildings that are between 50,000 and 75,000 square feet.” Zelman’s parking lot is expected to cost roughly $7 million to build. That’s a drop in the bucket compared to the $65-million project initially on the table, and would be much quicker to get off the ground: It’s expected to be up and running by December. Burbank City Manager Robert “Bud” Ovrom said the city is disappointed in Zelman’s decision, but said there is “so much activity going on in Burbank” that putting the project on the back burner for five or 10 years won’t have too negative an impact. And because parking lots are cheap to build and operate, they make good alternatives to vacant land that is not generating income. “Usually, holding land is expensive, so if you are going to hold it, this is a good way to do it,” said Ovrom. “They (parking lots) are little cash registers.” Cash registers for Reiling, who is in the middle of purchasing the land from Lockheed for an undisclosed sum, and cash registers for the city, which will collect 10 percent in tax revenue for each car parked. Is there a need for more parking at the Burbank airport? That depends on whom you ask. “There is absolutely a need there, otherwise why would be opt to do it?” asked Reiling. Airport officials, however, say they don’t need new spaces, they just need to reconfigure the established lots to offer more options for valet service. “In terms of the total inventory, we seem to generally have enough capacity,” said airport spokesman Victor Gill. The airport owns and operates two short-term parking lots, three economy lots for long-term stays and three valet parking sites with a total of 4,562 spaces. There is also private parking available at the Airport Hilton Hotel and Carter’s V S P Airport Parking nearby. The airport has filed applications to reconfigure three of its lots, but those plans are problematic because they include extending on to portions of the B-6 property where the airport had hoped to build a new terminal. That property is now up for sale as a result of a breakdown in negotiations between the city and the airport over the terminal issue. “The issue we are facing at the airport is that some of that parking (or proposed parking) is going to disappear because of the sale,” Gill said. Ironically, having the B-6 property, now owned by the Airport Authority, on the market also is a problem for Zelman. If the city and airport don’t reach a compromise on the land, it could be sold to a third party, and that could affect what Zelman does with the property in the long term. Since it hit the market it’s been getting a lot of attention if not firm offers from commercial developers and lenders, which made it more difficult for Zelman to secure funding for his industrial project. “It’s not just the marketplace, but what’s going on in the area,” said Sue Georgino, Burbank’s community development director. Georgino said that, even though the city has seen demand for industrial space taper off, some requests for space are still coming in, particularly from film studios. Nevertheless, because the city has roughly $190 million of commercial and office development underway, she said, there is perhaps less pressure to develop industrial space right now. “It’s clear that the industrial market has cooled off, but we aren’t panicking,” Georgino said. “I think it’s a good time for us to not be in the heated frenzy we were in this time last year, so that we can accommodate the additional growth when it comes.” Meanwhile, Reiling is preparing for the opening of some of the retail facilities in his Empire Center on Lockheed’s former Skunk Works site, also near the airport. Target, Costco and a Best Buy are among the stores that will open this fall in the $200-million, 900,000-square-foot retail and office complex. And Gary Kaiser, project manager for Burbank-based Howard LLC, said plans for the second phase of his company’s 225,000-square-foot industrial park on Ontario Street near the airport are still on track. The first phase of that project was completed roughly a year ago. Existing tenants include Airborne Express, Kodak and Technicolor.

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