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Thursday, Jun 13, 2024

Real Estate

realestate/kanter/19inches/1stjc/mark2nd LARRY KANTER Staff Reporter After a number of lackluster years, industrial real estate development is on the rebound. With rapidly expanding entertainment companies gobbling up nearly every bit of available space in the East Valley, demand for high-quality industrial sites is reaching levels not seen since the late 1980s. In response, developers have begun embarking upon a number of build-to-suit, and even some speculative, developments not just in ultra-hot Burbank and Glendale, but in other regions of the San Fernando Valley, as well. “It’s back,” said an enthusiastic Barbara Emmons, vice president in the Glendale office of CB Commercial Real Estate Group Inc. “There is a lot more tenant activity than there are buildings.” That activity can be seen in tightening industrial vacancy rates. In the fourth quarter of 1996, the rate dipped to 6.8 percent, down from 10 percent for the like period last year, according to Grubb & Ellis Co. The shrinking supply of modern, industrial facilities has sparked a number of new developments, including the Valley’s first speculative industrial project in recent memory the Flower Street Business Park in Burbank. The five-acre development currently under construction at the former Andrew Jergens soap manufacturing plant near Verdugo Road and Olive Avenue consists of five buildings, each in the 13,000-to-15,000-square-foot range. Two of those buildings are in escrow with a pair of entertainment companies, said Mike Daven, an industrial properties broker in the Sherman Oaks office of Grubb & Ellis. The project’s second phase, meanwhile, will feature a 50,000-square-foot build-to-suit facility for “a major telecommunications company,” which Daven declined to name. It’s not just Burbank that’s seeing new development. Mounting demand in the East Valley is spilling over into neighboring locales. An example of that is a speculative development in Pacoima scheduled to break ground next month. The development consists of two buildings one 25,000 square feet and the other 38,000 square feet – in Pacoima’s enterprise zone. They are likely to be snapped up by warehousing, distribution or entertainment companies, said Chris Sullivan, vice president of Daum Commercial Real Estate Services in Woodland Hills, which is handling the project’s leasing and sales. “There’s a lot of pent-up demand for that kind of space,” said Sullivan. A number of factors besides the voracious appetites of entertainment firms are driving the new developments. For one, developers had been converting industrial properties into offices in response to an earlier demand for office space. That has helped create a serious shortage of industrial facilities, according to Daven. At the same time, much of the Valley’s existing industrial stock consists of 10,000- to 20,000-square-foot buildings built in the 1960s and 1970s that have substandard parking, loading and other facilities. “Today’s tenant wants newer construction,” Daven said. The shortage of large, modern facilities is prompting developments such as the Cascade Business Park, which broke ground in Sylmar last November. Located near the junction of the 5 and 210 freeways on land that has never before been used for industrial purposes, the 88-acre business park is zoned for both industrial and commercial use and is surrounded by an 18-hole, championship golf course. Frito-Lay Inc. has purchased 8.65 acres for a warehousing and distribution center. And several other deals are pending, according to Emmons, of CB Commercial. Also contributing to new industrial development is the region’s mounting economic recovery. “Developers are getting the courage to start getting into the speculative market,” said Ross Thomas, a partner with Delphi Business Properties in Van Nuys. “The banks also are getting more comfortable.” The growing prominence of Wall Street money and REITs also is paving the way for new development, real estate sources said. “It’s a very different market than it was a year ago,” said Thomas.

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