With the low vacancy rate and little developable land in Los Angeles, developers are heading to north to Santa Clarita to bring more industrial supply to the market. Trammell Crow Company and Clarion Partners have broken ground on The Center at Needham Ranch, a 54-acre industrial business park in Santa Clarita that is part of a 132-acre fully entitled industrial development. The project is slated for delivery in the third quarter 2018. We sat down with John Balestra, SVP at Trammell Crow Company to talk about the development and industrial activity and demand in the Santa Clarita market.

GlobeSt.com: What is your vision for Center at Needham Ranch?

John Balestra: Our vision is to deliver a best-in-class business park into a hyper-supply constrained market to meet the needs of occupiers desiring modern, state-of-the-art industrial space. The Greater Los Angeles North industrial market contains about 172 million SF of space with an average age of more than 40 years and only 21 million SF, or 5%, is considered Class A industrial space. The current vacancy rate for Class A space in the Los Angeles North market is effectively zero for locations in proximity to the populations centers in the greater San Fernando Valley. We are delivering buildings with modern features coveted by occupiers seeking greater operating efficiencies including up to 36-foot minimum clear height with ESFR fire sprinklers to accommodate substantially greater cubic storage capacity than a typical building in the LA North market with 24-foot or less interior clearance, abundant dock high and ground level truck loading positions with larger truck courts for efficient movement of product and higher levels of parking for vehicles than is typical in the market to support higher levels of employees and office build out than most existing industrial building can accommodate. In combination with the many advantages of locating within the City of Santa Clarita, combined with the ability to deliver up to 4 million SF of space, we believe that the Center at Needham Ranch will in time be recognized as the premiere location in the Santa Clarita and San Fernando Valley for business.

GlobeSt.com: Why is Santa Clarita a good location for this development?

Balestra: There are three primary reasons why the City of Santa Clarita is a great location for this development. First, is the location itself, being 30 miles north of downtown Los Angeles and minutes from the intersection of Interstate 5 and the 405 Freeway and 1 mile from the intersection of Interstate 5 and Highway 14. The site has access to over 5 million people within a 30-minute commute, which provides tremendous access to a highly skilled and educated workforce and proximity to millions of consumers for quick product delivery. It is also located within the Thirty Mile Zone, which is advantageous for film production, which is a substantial demand driver locally, and the Metrolink Newhall Station is in close proximity.
Second, The City of Santa Clarita is rated as one of the best cities in all of California in which to do business with a highly responsive City staff and political leadership focused on job creation and economic development. With substantial economic incentives, expedited permit processing and no gross receipts tax, utility user or business license fees, businesses have a much lower cost of doing business in Santa Clarita than neighboring communities in the City of Los Angeles. The City of Santa Clarita is one of the safest cities in America according to the FBI Total Crime Index, has an abundance of local amenities including the Old Town Newhall area that is undergoing substantial redevelopment and a very high quality of life with recreation opportunities and access to open space. It's the best of both worlds; easy access to the huge Los Angeles market in a more suburban, high quality master-planned environment. The advantages for businesses are virtually endless.
Third, the Santa Clarita Valley has a significant jobs/housing imbalance for its 275,000 residents, which results in tremendous freeway congestion with tens of thousands of commuters clogging the freeways commuting to jobs in Los Angeles daily. The ability to provide new industrial space for companies to occupy in Santa Clarita will make available several thousand additional new local employment opportunities for local residents and reduce traffic congestion on area freeways. Companies desiring a highly skilled and educated workforce will benefit by locating in Santa Clarita. In addition, this growth in the local employment base will increase personal and business spending within Santa Clarita and support increased economic activity within the entire Santa Clarita Valley.

GlobeSt.com: What is industrial demand like in Santa Clarita?

Balestra: Santa Clarita and the greater Los Angeles North market has substantial active industrial occupier demand with over 10,000,000 square feet in active user requirements we are tracking amidst a very low 1.2% industrial vacancy rate. The Santa Clarita and Los Angeles North market, like that of the Greater Los Angeles industrial market, has not been able to keep pace from a new supply standpoint, over the last decade or more, with growing industrial demand based on population growth, increased volumes of goods moving through our local ports and the growing obsolesce of the aging industrial base. We are seeing the conversion of industrial properties to higher and better uses such an mixed-use and multifamily development, retail centers and creative office uses. There is extremely limited land available for new industrial development to satisfy the substantial demand for modern Class A space. Santa Clarita is a hotbed for growing industries such as Digital Media/Entertainment, Aerospace and Defense, Biomed and Technology users who are seeking modern high quality facilities. The Center at Needham Ranch is very well positioned to satisfy this occupier demand.

GlobeSt.com: How does this industrial market compare to Inland Empire and Los Angeles?

Balestra: The Inland Empire and The Los Angeles North industrial markets are quite different. The Inland Empire is primarily an import driven distribution market for both regional consumption and the distribution of imported goods to the rest of the US. It is a newer industrial market that until recently had an abundance of land, thus it has larger more modern facilities required by retailers, logistics companies and others. However, with the growing shift in supply chain strategies and rapid growth in E-Commerce requiring tighter delivery commitments, there is a move towards last mile fulfillment strategies which simply cannot be accomplished from a location 50-100 miles away from the Los Angeles population centers. Throughout the infill industrial markets of Los Angeles, we are seeing substantial leasing activity to support last mile activity. A case in point is our The Brickyard project in Compton, where we secured Best Buy and UPS to occupy over 1 million SF to satisfy their locational requirements to meet customer need for speedy delivery. Given the 10 million people living in Los Angeles County, demand for infill industrial space will remain robust. Additionally, Los Angeles and in particular the Los Angeles North market has a far more diverse economy with manufacturing, media and entertainment, biotech, technology and other occupier categories, in addition to bulk warehouse/and logistics oriented users. Historically, the LA North industrial market has been more stable and with significant barriers to new supply has less potential for overbuilding.

GlobeSt.com: Have you seen tenant demand yet for this project?

Balestra: Yes. We have just recently completed site clearing work and commenced grading activities and have not even started the vertical construction phase yet, with the first three buildings slated to get underway the end of the first quarter of 2017 for year end 2018 delivery, but we are already receiving a significant level of interest by a wide range of occupiers including media and entertainment, consumer products, logistics and fulfillment, to name but a few. Given the lack of available industrial space, this is no surprise.

Instant Insights /

Industrial Developers Head North, Not East

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