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Big Carson Industrial Project Due

Development: Work on 2 buildings to begin next month. A total of 3.1 million square feet should be completed in 5 years.

March 14, 2000|BOB HOWARD | SPECIAL TO THE TIMES

Carson Cos. is nearly ready to start building more than 3 million square feet of industrial space on one of the largest remaining pieces of undeveloped land near central Los Angeles, a 156-acre portion of the Dominguez Technology Center in Carson.

Construction will begin in early April on two industrial buildings, the first 367,000 square feet of what will ultimately be 3.1 million square feet of industrial buildings, according to Jim Flynn, president of Carson Cos.

The Dominguez Technology Center is a 438-acre industrial development in Carson and an adjacent unincorporated area of Los Angeles County known as Rancho Dominguez--part of what was a 75,000-acre Spanish land grant.

Most of the technology center land in Rancho Dominguez has already been developed by Rancho Dominguez-based Carson Cos. and Watson Land Co., according to Flynn.

The land under development was an oil field, but production was curtailed three years ago in anticipation of its conversion to industrial warehouse space and light manufacturing, Flynn said.

He said Carson Cos. has nearly completed two years of work on roads, fiber-optic cable, sewer lines and other infrastructure required before building construction can begin. The work included the widening of Wilmington Avenue and Carson Street as well as improvements to freeway interchanges.

The construction schedule calls for building 700,000 square feet of space this year and completing the total 3.1 million square feet within five years. However, Flynn said the company will adjust its schedule, if necessary, according to market demand.

The 3.1 million square feet is only a small portion of the industrial space Los Angeles needs if it is to continue its economic growth, according to real estate and economic experts.

The county needs as much as 21 million square feet of new industrial space per year to accommodate high-paying manufacturing and technology jobs, according to a report last summer by the Los Angeles Economic Development Corp.

But only about 10 million square feet of such space is being built per year, the report said. The report chided city governments for favoring retail developments over industrial space, a policy that "generates few livable wage jobs" and ultimately will result in "too many retail establishments, too few customers and failed projects," the report said.

The agency said the demand for modern industrial space is most important in areas near central Los Angeles and near the ports of Long Beach and Los Angeles, including the South Bay industrial market where Carson Cos. will develop its new buildings.

The Carson site, within a Foreign Trade Zone sponsored by the Port of Los Angeles, is one of only a handful of industrial development sites in or near central L.A. and the ports. Among them are the 265-acre Golden Springs Business Park underway at a former refinery in Santa Fe Springs and 115 acres in the Carson portion of the Dominguez Technology Center under development by Watson Land Co.

Because of this shortage and the burgeoning demand, new industrial space is being snapped up before the ink is dry on architectural drawings, according to broker John Schumacher, part of a CB Richard Ellis team that is marketing the Carson Cos. project.

"We have offers on over 1 million square feet of buildings in Carson that we haven't even broken ground on yet," Schumacher said. "There are five industrial transactions in the South Bay that have been consummated in the last 60 days off of blueprints for about 470,000 square feet of what were supposed to be spec buildings."

So-called speculative projects are undertaken without a tenant in hand, with developers hoping to find an occupant before or soon after construction is finished.

Industrial developers usually consider a speculative project successful if they find a tenant six months to a year after completion, so it's remarkable that tenants are signing leases for buildings that are barely past the conceptual stage, Schumacher said.

According to a new report by Grubb & Ellis Co., industrial users are "gobbling up buildings while the space is still under construction."

The Grubb & Ellis report, which listed the South Bay industrial vacancy rate at 4.1%, said 89% of the 2.2 million square feet of new industrial space that was completed in the South Bay was leased and occupied by the end of the year. It called this an "unprecedented" rate of leasing for new space.

Flynn said industrial tenants today are signing leases for space that won't be finished for a year or two.

"They never needed to do this before because there was always enough supply to meet their needs," Flynn said.

Tenants in the South Bay include a combination of manufacturing and distribution companies, many of them high-tech and e-commerce firms, Flynn said.

"One of the tenants we're negotiating with writes and distributes software--and does it all in the same facility," Flynn said.

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