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COMMERCIAL REAL ESTATE | Market Report / San Gabriel

Making a Comeback

Developers Are Returning to County's Eastern Edge


Anyone searching for evidence of the San Gabriel Valley's commercial real estate comeback from a prolonged slump need look no farther than an old Irwindale gravel pit.

That unlikely site is fast on its way to becoming one of the region's most ambitious new industrial parks. The pit's conversion--a decade in the making--illustrates how developers are flocking back to this area after a long period on the sidelines.

"We originally planned this back in 1987, but we had to put it on hold when the real estate market tanked in 1990," said Scott Wilcott, vice president of CalMat Co., a gravel producer whose pit is becoming the Irwindale Business Center.

After detecting the first signs of a recovery in 1995, CalMat began filling the pit with dirt. With the site filled and most infrastructure in place, half a dozen bidders have made offers to buy the first 55-acre phase of the 107-acre business center. Local observers expect the company to get close to its $20.5-million asking price, a prospect that was inconceivable just three years ago.

"We wanted to be ready for when things turned around, and it looks like our timing is very good," Wilcott said.

Much is very good right now in the region that stretches from Pomona to Pasadena, particularly in the industrial market that dominates the area. Vacancy rates for warehouses and manufacturing plants in aptly named cities such as Industry and Commerce have dipped to about 6%, and several new projects are either on the drawing board or under construction.

"There's been a surge of speculative building after a downturn that felt more like a depression," said Stuart Milligan, a broker for the Cushman & Wakefield real estate company. "It would be fair to say that the market is very healthy again."

In fact, the downturn in the diverse San Gabriel Valley was not nearly as deep as the one that afflicted the aerospace-dependent South Bay. With a rich network of rail lines and freeways, and a location on the eastern edge of Los Angeles County, the valley is a natural gateway to the region. At its worst, only about 13% of industrial buildings were empty as everything from computer chips to potato chips was shipped through the area. Now that the vacancy rate has been sliced in half, developers are aggressively jockeying for new projects.

About the only cloud now hanging over the area's economy has drifted in from Asia. Much of the San Gabriel Valley's recent development has been fueled by Asian companies--the area is sometimes referred to as the Chinese Silicon Valley because of the proliferation of Asian-owned computer and communications companies. Some people warn that a lengthy Asian economic downturn could cut the capital pipeline to this region.

"It's still unclear what impact this Asian flu could have on our market," said Simon Lee, owner of Simon Lee & Associates, a San Gabriel architectural firm. His company, which has designed local banks, office buildings and apartment complexes, took work in Houston and even Shanghai to get through the slump earlier this decade.

Lee now fears that problems across the Pacific could crimp what had been shaping up to be boom times. "This market is getting better, but I think Asia definitely could have an impact," he said. "We'll have to wait and see."

Many others, however, don't share Lee's concerns and are pushing ahead with major projects.

Unical Enterprises, which imports Chinese-made telephones, expanded its City of Industry distribution center by 25,000 square feet last year, then quickly bought two more acres to expand again. "Things are going well and we're in a growth mode," explained Roger Brannan, Unical's vice president of sales.

That kind of growth has persuaded developers to dust off their bulldozers and cranes.

The Koll Real Estate Group, for example, has teamed up with the City of Industry's redevelopment agency to turn a former cattle feed yard into a 71-acre center of manufacturing, distribution and research buildings. Koll, based in Newport Beach, originally expected the $55-million project, known as the Plantation, to be completed in three years. But company officials indicate that it may happen sooner, given the early interest.

Officials from Industry, who initiated the project on city-owned land, say the development could generate 1,500 jobs and may persuade some expansion-minded companies to stay in the area.

"We were concerned that companies would start migrating to the Inland Empire if they couldn't find the space here," said Carl Burnett, the executive director of Industry's Redevelopment Agency. "We've basically had six years with no new construction and the vacancy rates are very low."

Industrial space is leading the region's recovery, but the office and retail market are also stirring.

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