Office construction and leasing have surged across the eastern San Gabriel Valley as cost-conscious tenants from Pasadena and north Orange County flock to the area in search of affordable office space.
In Diamond Bar, office space totaling more than 400,000 square feet has been completed recently or is under construction in the hills overlooking the interchange of the 60 and 57 freeways. Newcomers to the city's 255-acre Gateway Corporate Center include such Fortune 500 companies as Travelers Group and Allstate Insurance Co. There is talk of new restaurants and stores opening to serve the hundreds of additional office workers.
The building boom in Diamond Bar is the most dramatic example of the surge in office development across the eastern San Gabriel Valley as commercial tenants move to escape rising prices elsewhere.
"This market has come into its own," broker Taylor Ing said of the area east of the 605 Freeway. "It's a very viable market now. Before, it was an afterthought."
High-technology firm Ortel Corp. recently agreed to lease 186,000 square feet in Irwindale in what was once the headquarters of now-defunct H.F. Ahmanson & Co. In Covina, a developer has replaced a shopping center with an office park. There is even a proposal to transform portions of the infamous BKK landfill in West Covina into a giant campus for office tenants and research and development companies.
Developers have been so active in the area that they have gotten ahead of demand. During the first quarter of this year, the vacancy rate for the eastern San Gabriel Valley stood at 23.1%, about double the rate for Los Angeles County, according to the real estate firm Grubb & Eliis. But area brokers say demand remains strong--more than 400,000 square feet was leased in the first quarter--and vacant space won't remain empty for long.
In Covina, the five-building Covina Technology Center was built with research and development firms in mind, leasing broker Rick Sheckter said. But, only a few months after opening, the former shopping center has proved more popular with office tenants than with high-tech firms. About 50% of the 157,000-square-foot complex already has been leased.
'We haven't seen growth in the office market in some time," said Sheckter of Grubb & Ellis. "It's a good sign."
The area is attractive in part because of its easy freeway access and proximity to affordable housing, a major concern for employers with large clerical staffs and call-in centers. In addition, office rents--despite a 20% increase in the last two years--remain substantially below more established business centers. Monthly rents in Brea, for example, run about $2.50 per square foot compared with $2 or less a short drive away in Diamond Bar, said Grubb & Ellis broker Amy McNamara.
The difference in rent and the room for expansion were key reasons that both Allstate and Travelers relocated some of their Brea operations to new structures in Diamond Bar. Travelers leased about 70,000 square feet in a pair of three-story office buildings constructed by Trammell Crow in Gateway Corporate Center. Allstate has agreed to occupy more than 125,000 square feet in nearby buildings developed by Opus West. Allstate has emerged as Diamond Bar's largest employer, with more than 1,000 workers employed in a customer service center and an underwriting division.
Allstate spokeswoman Lisa Wannamaker said the area's proximity to labor markets in Los Angeles and Orange counties influenced the company's decision to move into Diamond Bar.
The construction of office buildings has proved a major boost for Gateway Corporate Center, whose original owners, a joint venture of Zelman Development and Copley Real Estate Advisors, lost control of the office park during the real estate bust of the 1990s. The current building boom means that Gateway Corporate Center, which is home to the Southern California Air Quality Management District, is nearly built out.
One of the last buildings that will be constructed in Gateway is by a developer once active in Brea, where many of Diamond Bar's new tenants have originated. Los Angeles-based Trenton Group said work on the three-story, 90,000-square-foot office building is scheduled to begin in the summer.
"I had built a lot of products in the 1980s in the Brea area," Trenton president H. Theodore Greene said. "Now, because of the lack of space and land, people are starting to move up north to Diamond Bar."