The developer of one of the largest industrial parks in Los Angeles County, Golden Springs Development Co., broke ground last week on the 2.5-million-square-foot, 135-acre second phase of its Golden Springs Business Park at the site of a former oil refinery in Santa Fe Springs.
Undeterred by a slowing economy that has weakened demand for manufacturing and warehouse space, the company began construction of a 220,000-square-foot industrial building and expects to start building a 280,000-square-foot warehouse soon, said Moshe Sassover, president of Golden Springs, which is based in Santa Fe Springs.
Buildings in the second phase of the project will be designed for manufacturing and warehouse operations, Sassover said, and will range from 100,000 to 500,000 square feet.
The first two structures are expected to be finished in mid-2002, with other construction to proceed in response to market demand.
Golden Springs built about 2.5million square feet of industrial space in the 140-acre first phase of the 275-acre project, which is near Imperial Highway and Carmenita Road, and has leased all but about 370,000 square feet of it, according to broker Clyde Stauff of Colliers Seeley International, which is the listing broker for the development.
Despite the slowing demand for industrial buildings, Stauff noted, Golden Springs recently signed logistics company Performance Team to a 10-year lease for 306,000 square feet of space.
The business park occupies a 275-acre site where Gulf Oil Co. and later Golden West Refining Co. operated an oil refinery and maintained oil storage tanks. Golden West shut the refinery in 1992 and later sold the property to Golden Springs for development as an industrial park.
"Large, centrally located parcels like this are scarce," said Jack Kyser, chief economist of the Los Angeles Economic Development Corp., which has been saying for several years that the demand for modern industrial space far out-paces the supply in Los Angeles County.
"Even though you might ask if this is a good time to break ground for something like this," Kyser said, "keep in mind there are 600,000 people working in manufacturing in Los Angeles County" and a growing logistics industry that needs more space in the long run.
Though the county has more than 1 billion square feet of industrial facilities, much of that space is old and outmoded, Kyser said, and much of it is situated on properties too small to accommodate modern industrial operations that require larger buildings, wider streets, more loading docks and more room for trucks to maneuver near the loading docks.
Although obsolete industrial space can theoretically be redeveloped as modern space, Kyser said, assembling development sites the size of Golden Springs is difficult because most of the outdated buildings are on small properties that are held by many separate owners.
The first phase of Golden Springs consisted entirely of speculative buildings, developed with no tenants committed to the space.
The first two buildings of the second phase also will be speculative construction, Sassover said, so last week's groundbreaking could be viewed as a bold move in light of the risk that demand for industrial space still could be slackening when the new buildings are completed.
But Golden Springs is optimistic about finding tenants for the new space, Sassover said.
The company hopes to construct some of the second phase on a build-to-suit basis. That is, the space would be built for a tenant who agrees in advance to occupy the building when it's done.
The project is being designed by Hill Pinckert Architects of Newport Beach and built by general contractor Millie & Severson of Los Alamitos.
Golden Springs will face relatively little competition from other new buildings, said broker Cameron Driscoll of Cushman & Wakefield, because few projects are under construction in or near Santa Fe Springs, which is part of the Mid-Cities industrial market, which straddles Los Angeles and Orange counties.
The Mid-Cities area has boomed in recent years because its few available sites attracted companies that were squeezed out of even tighter industrial centers such as Commerce, Vernon and central Los Angeles, Driscoll said, and because the Mid-Cities area is convenient for companies that want to service both Los Angeles and Orange counties.
The market for Mid-Cities industrial space remains "relatively tight" despite the slowdown, Driscoll said.
Of the 96 million square feet of industrial space in the Mid-Cities market, about 5.6% was empty at the end of the third quarter, compared with 3.4% at the beginning of this year.
That is still well below the 10% considered healthy for an industrial market, according to Cushman & Wakefield research.