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Friday, Oct 4, 2024

Transformation: A Decade of Change in the Valley

In 1996, while the rest of Los Angeles, and the nation, began climbing out of a recession, the San Fernando Valley was a patchwork of scaffolding, teetering reminders of the devastation of the Northridge Earthquake that was still beating down the area’s economy. The median home price, at about $166,000, was falling, foreclosures were rising and bankruptcy petitions were being filed at alarming rates. The Valley was littered with plans gone sour or sideways huge tracts of land in Warner Center, Panorama City, Northridge and Burbank, lay fallow as development design plans completed years before grew dusty on shelves. Shopping centers in Sherman Oaks, Woodland Hills and Northridge were nearly empty. Office and commercial vacancy rates were rising. But 1996, the year the first edition of the San Fernando Valley Business Journal was published, was also a turning point. In the 10 years since, the Valley has reinvented itself as an urban metropolis, with the same advantages and woes of cities everywhere. Despite the failure of the secession movement, today’s Valley, corporate headquarters to Amgen, Countrywide Financial Corp. and Walt Disney Co., to all intents and purposes, is a city in its own right. It feels the economic winds of change like any other city. It struggles with housing and transportation issues, just like any other city. And it worries about its future growth just like any other city. Although the process may have started much earlier, the story of how the Valley grew from a bedroom community to a self-contained economic engine unfolded mostly in the last 10 years. Ten years ago, United Online, ValueClick and Ixia, now among the region’s largest public companies, didn’t exist. MiniMed, now part of a $10-billion conglomerate, was a $55 million company. Amgen employed just under 8,000 workers instead of today’s 15,000 staffers. Countrywide wrote $37.8 billion in home loans, a far cry from last year’s $491 billion. Even the Walt Disney Co. had revenues of just $19 billion, a shadow of its current $32 billion size. There was no Red Line in North Hollywood, no Orange Line traversing the Valley or business improvement districts. The Civic Center complex that now serves as the seat of the region’s government in Van Nuys, was a single, rickety building. There was no Civic Arts Plaza in Thousand Oaks. Calabasas had no Commons, Simi Valley had no Town Center. And if there was any traffic west of Agoura Hills, it was likely to be on the weekends, when folks packed their kids up for an afternoon of strawberry picking. But if a snapshot of 1996 offered a small-town view of the Valley, it also held a glimpse of the transformation that was to come. In 1996, Disney completed its $19-billion acquisition of Capital Cities/ABC in a deal that heralded an entertainment industry boom that would ultimately serve as a linchpin of the Valley’s economic recovery. Freed from the regulatory constraints of the 1970s, synergy became the corporate mantra and in the years that followed Disney’s deal conglomerates swallowed up a string of entertainment companies in an effort to control content along with distribution. Two new networks, WB and UPN, launched along with numerous cable stations, creating a new entertainment paradigm that doubled the Valley’s share of the industry payroll from about $3 billion in 1992 to over $6 billion in 1999. “The big growth (in entertainment) in recent times was the growth in the latter part of the 90s, and the huge percentage of that growth took place in the Valley,” said Joel Kotkin, an Irvine Senior Fellow at the New America Foundation, consultant on economics, politics and social trends and author. “A lot of that happened because first of all there was a proliferation of cable channels and all of a sudden there was a huge need for product. At the time the dollar was relatively weak it was before people started moving to Canada and the Valley was cost effective.” In 1996 Douglas Emmett acquired the Sherman Oaks Galleria ushering in the era of the mall as entertainment center. In later years, General Growth would overhaul Fallbrook Center, tearing down the enclosed mall in favor of an outdoor power center, and renovate Northridge Fashion Center, now with a multiplex and a host of restaurants; Westfield would remake its Promenade as a lifestyle center and Macerich would rebuild the Panorama Mall, anchored with the first L.A.-area Wal-Mart. In 1996, Katell Properties set out to develop what was to be among the first mixed-use centers combining office and residential properties in the Valley, although the plan was eventually changed to a residential community under another developer, and it would take close to 10 years for the mixed use concept to really take hold in the region. In 1996, development was beginning on 60 acres in Newhall Land’s newly opened Valencia Commerce Center, signaling the emergence of Santa Clarita as an economic engine of its own. And between 1996 and 1998 the Conejo Valley would add 2 million square feet of commercial space all paving the way for the business growth ahead. “The difference in terms of capital availability and the insatiable demand you see today for all forms of real estate is an unbelievable difference,” said Jerry Katell, whose Katell Properties today remains largely a real estate investment company. “Ten years ago we were just coming out of the real estate recession and people were still able to buy buildings for less than replacement costs. “You think about a property like Warner Ridge which was fully entitled. What a frenzy there would have been today, and instead it was quiet. Nobody was buying raw land.” With cheap land, plentiful office space and inexpensive housing, the Valley attracted businesses and entrepreneurs along with an ample labor pool of new residents, and the region joined the rush into the new world economy. United Online and Ixia both were founded in 1997. ValueClick formed the next year. A long list of e-commerce companies, from online children’s marketer Enson Inc., to enutrition.com and greatdomains.com, a broker of Internet domain names, were setting up or operating in the region through the late 1990s as were semiconductor and fiber optic industry players including Xircom, Xylan and Trikon Technologies. “The Internet was really our driving factor,” said Larry Cohen, president of Glyphix, an advertising firm formed in 1995. “Everyone was clamoring and trying to figure out what to do, and right through when the bubble burst, there was a lot of money coming in.” Some of the new businesses failed in the dot gone era that followed. Taxes4Less.com; Veriserve, Wizshop and others all closed up by 2001. Some Syncor International and Xylan among them succeeded, so much so that they were acquired by far larger companies and moved elsewhere. Still others never got off the ground: A move to form Horizon Bank, an independent that would serve small businesses and pharmacists out of Encino, was abandoned after a year. The Alexander Hotel opened in Canoga Park sparked by the notion that business travelers in the West Valley would welcome a boutique hotel and shuttered its doors after a year. And Quick Test 5, with a plan to market a nicotine-based beverage as a stop-smoking aid, ran afoul of the FDA. But by the time the new millennium rolled in, many of the ideas that took root in the 1990s were prospering, enough so that the events of the early 21st century affected the Valley economy just as they did the rest of the world. Both the economic impact and even the tragedy of Sept. 11, 2001 hit home in the Valley. Dr. Yeneth Betru, director of medical affairs at IPC-The Hospitalist Co., Edmund Glazer, CFO at MRV Communications and Dora Menchaca, associate director of clinical research at Amgen, all perished in the terrorist events of Sept. 11. Added to terrorism fears, accounting scandals, a downturn in the telecom industry and on Wall Street led businesses of all sizes to stop spending. In the Valley, Arthur Anderson’s offices closed after the company was convicted for its role in the Enron scandal and about 70 local employees got pink slips. Power-One, with customers like Cisco Systems, laid off 24 percent of its workforce. Businesses throughout the Valley’s tech sector felt the same pain as did national firms. “In the beginning for the first couple of years, there was excellent growth and there was a lot of bullishness about the business and the economy,” said Lief Morin, who founded Key Information Systems, one of the Valley’s largest technology companies founded in 1995. “Then Sept. 11 happened, and that had a very significant impact on our business. Then I would say in the last three years we’ve seen a healthy and yet cautious rebound from those events.” Today in the Valley, elegant business parks dot the landscape, from the Pinnacle in Burbank to LNR Warner Center in Woodland Hills and businesses, most recording healthy profits and strong revenue growth, have propelled the stock index for the Valley’s 50 largest public companies 13 percent year to date. Newcomers to the public sector, including DTS Inc. a digital technology entertainment company, and Mannkind Corp., a biotech player, have seen their stock prices rise by double digits since filing initial public offerings. Venture capitalists plumb the Conejo Valley looking for prospects. Independent banks, missing since the consolidations of the early 1990s, are opening again to take advantage of the burgeoning mid-sized company sector in the locale. There are problems. Median home prices inching above the $500,000-mark have created a housing crisis. There is no land for businesses to expand. And virtually full employment means traffic crawls along the Ventura (101) Freeway clear through the Valley from Burbank to Westlake Village. Some companies, unwilling to navigate the state’s regulatory climate, are leaving. Some worry that complacency has replaced the secession movement, and the Valley’s economic growth and prosperity may be derailed by a city government that does not have its best interests at heart. But by and large, the economy of the region is strong, and the Valley’s companies, smaller and more nimble than many on the other side of the hill, are embracing new methods and technologies in ways that some say will insure continued growth. “Over the last seven years, we’ve seen people and companies are turning to technology to drive innovation in their business and find new opportunities in the marketplace,” said Morin. “I think that’s very applicable in the Valley, and I think that a lot of the new wealth will be created in these industries.”

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