Firm Builds Space for Future Tenants

Developers of the Hasley Business Center are taking on the area’s first speculative construction project in the Santa Clarita Valley in more than two years. Avalon Investment Company, headed by father and son duo Jonathon and Weston Cookler, are in charge of the two-phase industrial office project located in the Valencia Commerce Center. The first phase of the project – built on speculation – is nearly complete and has already attracted one tenant, Weston Cookler said. It consists of a 10,756-square-foot building and a 14,241-square-foot building, both built to LEED-certified standards. The second phase, which is not yet underway, is a 45,000-square-foot, LEED-certified building. It will be developed to suit a potential tenant’s specifications, once that tenant has committed to leasing the space, Cookler said. Building on speculation in today’s challenging real estate market comes with some serious risk. But area commercial real estate experts say Avalon’s project fills a need for more large industrial space and could spur more construction in the region. During the recession, the market overcorrected, said Jonas Peterson, president of the Santa Clarity Valley Economic Development Corporation. As the supply of vacant space begins to tighten, having a variety of new buildings ready to be occupied is important, he said. “Speculative buildings are an important part of that product mix,” he said. Through the first quarter of 2011, more than 700,000 square feet has been leased or sold, Peterson said. Three recent sales were for properties that spanned more than 100,000 square feet. “We are seeing a limited supply of larger industrial buildings in the Santa Clarita Valley,” Peterson said. Others say speculative building is a bold move, considering the economic recovery remains sluggish and some real estate companies experienced devastating financial consequences from failed speculative projects following the recession. “I can see it a year from now, but it’s a pretty risky and bold move to do today,” said Mike Tingus, president and managing principal for Lee and Associates in Calabasas. However, it will be a good test for the regional market, and if successful, it will benefit the local economy, Tingus said. Valencia Fulfillment, Inc. will be Avalon’s first tenant. The company, which offers services ranging from printing to packaging, is relocating its headquarters to the 10,756-square-foot-building at 28610 Hasley Canyon Road by the end of this month. The building offers ample manufacturing and production space and is well-designed, said company President Jose Corona, in a written statement. “For us, choosing a LEED-certified building means providing a healthier work environment for our employees, while saving costs on utilities and lessoning our impact on the environment,” Corona said. Cookler would not discuss prospective tenants, but said interest has been strong. “The building won’t be an eyesore,” Cookler said. Vacancy rates in industrial buildings in the Santa Clarita Valley have dropped. In 2009, the vacancy rate was 11.1 percent; now it’s 6.8 percent, according to a 2011 economic and real estate report released in April. Valencia has a vast array of large companies, but there are people who have broken away to start their own businesses and are looking for free-standing industrial space, said Jim Ebanks, senior director of Realty Advisors Group in Valencia. Until now, the vast majority of new construction in Valencia has been multi-user campus environments, he said. Companies want to have the “headquarters-feel” when they look for a new space, Cookler said. Plus, the project’s LEED certification differentiates the Hasley space in a competitive market and assures tenants that they are being more cost-efficient, Cookler said. “We use more materials that are from renewable sources and recyclable materials,” said Cookler. “It is the future of development.” Avalon’s development will add to the momentum that’s building in the Santa Clarita Valley’s commercial real estate market, Peterson said. As the market continues to improve, he said, it “will make us attractive to additional spec projects.”