|
Although much has been written about the loss of manufacturing employment in Los Angeles County, the manufacturing sector remains a major driver of the County economy, providing 620,000 jobs housed in 240 million square feet of industrial space. Within this industrial market, there are niche opportunities for attracting job-intensive, high-value manufacturing to the WIP. The following discussion summarizes key market conditions in the region and identifies resulting development opportunities forthe WIP. Regional Market Trends
Regional Market Trends1. The industrial market in the five-county region is comprised of an estimated 1.5 billion square feet of industrial space, approximately one billion of which is located in Los Angeles County. Orange County and the Inland Empire each have another quarter billion square feet of industrial space, while Ventura County is the smallest industrial market with just over 50 million square feet of space. The supply of industrial space in the region consists of just under 60 percent warehouse and distribution space, 30 percent manufacturing space, and approximately 10 percent high technology or research and development space. 2. Between 1999 and 2001, the industrial market in the five-county region absorbed an average of 42.9 million square feet of space per year. If this rate of absorption is maintained in the future, then approximately 429 million square feet of industrial space will be demanded in the region over a 10-year period. According to DAUM Commercial Real Estate Services, there is presently 12.8 million square feet under construction within the Los Angeles Basin. 3. Regional employment and population growth over the next decade are expected to increase at an average annual rate of 2.3 and 1.2 percent, respectively. Employment in the region has grown modestly in the past ten years, at an average rate of 0.5 percent, or about one-third the rate of population growth. Although this is low in percentage terms, due to the size of the market (nearly half of California’s residents and non-farm workers), it resulted in an absolute increase of 346,000 jobs over the decade – 18 percent of jobs added in California. 4. The Inland Empire will lead the region’s industrial growth in the next decade. This area, encompassing the counties of Riverside and San Bernardino just east of Los Angeles, continues to mature as an industrial market. The industrial base consists of approximately 270 million square feet, but has ample room for expansion. In fact, the Inland Empire is one of the only markets offering large tracts of developable land at competitive prices, particularly in the eastern portion of this market. This market is also well located and central to most major population hubs in the Western United States, making it popular among small and large users alike. Approximately 4.2 million square feet are currently under construction in the Inland Empire. Los Angeles County1. The level of international trade occurring in Los Angeles County is expected to triple. Forecasts show that projected trade volumes will triple from the year 2000 level by the year 2020. Los Angeles is already the largest international trade center in the United States, with nearly $200 billion in imports and exports coming through the Los Angeles Customs District as of 1998. 2. Los Angeles County warehouse and distribution space comprises 64 percent of the County’s industrial base. The warehousing and distribution industry provides an essential adjunct to manufacturing and other sectors. The largest concentration of warehousing firms in the state is located in Los Angeles County, followed by Orange, San Diego, and Alameda counties. Because the region also has the largest concentration of manufacturing firms in the state, interim storage of parts and finished goods are required to serve the needs of these businesses. 3. Manufacturing employment in Los Angeles County is concentrated in the apparel/textiles, transportation equipment, and instrument manufacturing sectors. The retention of manufacturing jobs in the Los Angeles region is not only important for the gross domestic product in the region, but it also plays a pivotal socioeconomic role as well. Because low-skilled workers can readily get jobs in small manufacturing firms and move up the income ladder with the help of on-the-job training, this industry is crucial to the preservation of the region’s middle class. Maintaining these types of industries is particularly important for the Los Angeles region, where large groups of immigrant populations arrive each year and must be integrated into the local economy. The following items characterize major employment trends in L.A. County:
4. L.A. County has a shortage of developable land to meet the demands of expanding firms. Throughout L.A. County, existing inventory is older and limited by low ceiling heights, poor truck access, and other problems. Despite the flat job markets in the County, industrial users continue to seek opportunities to capitalize on the area’s central location and large labor force. In the South Bay portion1 of Los Angeles County, property scarcity will grow even more acute as the area’s transportation infrastructure is being upgraded and port capacity is rapidly increasing. In the midst of this activity, numerous small manufacturing operations are fighting for viable space. 5. In the short term, industrial demand is expected to be particularly strong for small to mid-size properties, with buildings sized between 10,000 and 30,000 square feet, throughout Los Angeles. Given the scale of the sector and the magnitude of expected growth, any reasonably clean, well-located parcel in the County will be highly sought after by small manufacturers and port-related service and industrial companies. Properties with workable infrastructure/subsurface conditions, which receive acceptable levels of City services, will be first to develop in coming years. Such parcels are in short supply. The demand for smaller buildings is occurring as a result of companies consolidating space in light of the contracting economy. This is particularly true with regard to forsale buildings. Many small businesses are already taking advantage of low interest rates by purchasing industrial buildings in the 5,000 to 30,000 square foot range. Over the long-term, demand for industrial facilities for lease and for sale will outstrip the supply of space that can be developed on the limited amount of land available for building in central and south Los Angeles County. South BayThe South Bay sub-market of Los Angeles County, stretches from Los Angeles International Airport down the coastline, and is comprised of Carson, El Segundo, Gardena, Hawthorne, Hermosa Beach, Inglewood, Lawndale, Lomita, Manhattan Beach, Palos Verdes Estates, Rancho Palos Verdes, Redondo Beach, Rolling Hills, Rolling Hills Estates, Torrance, and the Harbor City/San Pedro communities of Los Angeles. 1. The South Bay industrial market has tracked from LAX to Torrance over the past decade. The submarket’s center of gravity has shifted from the original concentration near Los Angeles International Airport (southeast) to Gardena, Torrance, and Carson. Higherend industrial uses have continued southeast along the 405, and are now concentrated in Torrance and Cypress. The majority of existing space is located in older, single-building developments, but there are several major planned or recently-constructed industrial parks offering more than one million square feet in modern facilities. Among the new developments in the South Bay area are Dominguez Technology Center, Carson Town Center, Harbor Gateway Center, the San Pedro Business Center/Port of Los Angeles Distribution Center, and the proposed redevelopment of Boeing’s 230-acre manufacturing facility at the Long Beach Airport to light manufacturing and R&D. Many of these projects are utilizing recycled land having somewhat less complicated constraints than the WIP and other properties around the harbor area. 2. The South Bay industrial economy maintained a large market share and diversified between 1990 and 2000, but lost significant manufacturing employment. There was a considerable shift away from manufacturing in the South Bay area during the 1990-2000 timeframe. The South Bay’s share of manufacturing jobs in the region declined from 9.3 to 6.9 percent over this 10-year period. This represents a sharper decline than experienced by Los Angeles County. Countywide, manufacturing employment declined at a rate of 3 percent per year, while the South Bay’s employment in this industry dropped at a rate of 4.6 percent per year. This loss is largely due to both structural adjustments in the national manufacturing economy, as well as the difficulty of expanding in this particular submarket due to a shortage of land. Harbor CitiesThis market is home to numerous logistics, assembly, and manufacturing companies that rely on the ports, as well as centralized access to interstate freeway systems and national railroad connections. Major findings include: 1. There is a very limited supply of clean, master-planned property in the Harbor Cities Area. In Carson, Long Beach, San Pedro, and Wilmington, manufacturing and logistics firms are vying for available space. If the shortage of master-planned properties potentially accommodating logistics and manufacturing firms can be alleviated through the concerted efforts and leveraging of resources of the public and private sectors, the area will see improved industrial absorption rates, which will likely contribute to further investment and reinvestment into the area. 2. The City of Carson has been a major beneficiary of Port-related industrial demand. Carson Town Center offers smaller (15,000-30,000 square foot) buildings for sale that are a good model for the WIP. Located immediately north of Wilmington, Carson is a relatively inexpensive environment to do business in due to the lack of a utility tax, a relatively low business license fee, and fast-track permitting. 3. Land values have remained strong in the Harbor Area. Local land values range from $10 to $15 per square foot for viable industrial property – similar to the average for the South Bay submarket. The values reflect proximity to the area’s extraordinary multi-modal transportation infrastructure, proximity to a very large and diverse industrial base, and a large, well-regarded, and diverse local labor force. Wilmington Industrial ParkThe WIP contains a mix of industrial buildings, residences, oil extraction equipment, oil storage tanks, automobile salvage and storage yards, unimproved streets and alleyways, and vacant land. Major findings are discussed below. 1. The local labor force is an asset. Multiple tenants interviewed for the study gave the local labor force high marks, many of whom walk to work and are located within a two-mile radius of the WIP. 2. Remaining development of industrial space identified for the WIP could be absorbed in as little as 10 years if land were assembled and cleaned up. The South Bay area captures, on average, about 20 percent of Los Angeles County’s net absorption. If that share drops to 10 percent, then the South Bay could capture about 2 million square feet annually. If the Wilmington Industrial Park can leverage its locational attributes to capture approximately 10 percent of the South Bay submarket, the site could be built out within a decade. 3. Capture of regional demand will require the ability to assemble viable industrial parcels offering appropriate scale and configuration. Demand appears to be strongest among smaller firms with fewer than 20 employees, implying buildings of approximately 20,000 square feet or less. While it is possible to locate such buildings within the existing block pattern in the WIP, the problem comes in with the relatively low yield (percentage of gross land area that is developable) brought about by the amount of right-of-way associated with this pattern. Also, a block/parcel pattern does not provide the requisite flexibility and diversity in product type sought by the development community. To attract significant investment, land may need to be assembled and made available to house clusters of industrial buildings. Such buildings could accommodate sales-service, assembly, manufacturing, and niche warehousing operations. 4. Security is an important issue for tenants in warehouse/distribution space. The Port Distribution Center located in San Pedro is a good model for secure design, as it backs to the Harbor Freeway and has just one access road. Security services include security personnel, surveillance cameras, and motion or audio detectors. Because Wilmington is perceived as a community with higher crime, a successful development may require secured access and parking as well as security patrol. 5. Key sectors serving as candidates for the WIP and surrounding industrial areas include:
Source: Wilmington Industrial Park Economic Adjustment Strategy, Market Study, Final Report - October 2, 2002, pgs. 9-15, Prepared by Economic & Planning Systems |
 |
 |
Los Angeles County is a significant employment and industrial
real estate market withinthe five-county economy. With 65 percent
of the regional employment (4 million jobs)and 60 percent of the
market share for industrial space (900 million square feet), Los
Angeles County comprises a majority of the regional economic base.