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Southern California’s commercial real estate market is booming, according to new report from Coldwell Banker Commercial.
The company’s Blue Book market intelligence report for 2016 says the region is gaining traction in a variety of areas, ranging from business expansion and low office vacancy rates to an increase in land sales and strong activity at the ports of Los Angeles and Long Beach.
The report notes, for example, that four new companies have leased nearly 40,000 square feet of research and development space in Pasadena over the past six months. And Kaiser Permanente continues to expand its office and medical space in the city.
“We’re building a medical school to train doctors who will either work for Kaiser or somewhere else,” Kaiser spokesman Lowell Goodman said. “It’s a four-story, 80,000-square-foot building that will be on the corner of Los Robles Avenue and Green Street. It should be completed in early 2019 and the first class will come in that summer. This is a big deal for us and for Pasadena.”
Kaiser currently employs 4,825 people at seven facilities throughout the city, including 119 physicians.
Huntington Hospital and Huntington Medical Research Institutes are building more than 260,000 square feet of new hospital and R&D space, the report said, and the office vacancy rate in the Pasadena/Burbank area hit a new recent low of 7.9 percent.
Frank Davis, HMRI’s vice president of finance, said a 35,000-square-foot research building is currently under construction on South Fair Oaks Avenue.
“We have four buildings now, but we sold one and are leasing another one,” he said. “The new building should be completed by November and we hope to be up and functioning by January of 2018. We needed more space and a more modern facility for our scientists to work in so they can do better research.”
Mixed-use project planned for SF Valley
Jumping to the San Fernando Valley, the report highlights Westfield Corp.’s plan to build an enormous mixed-use complex to replace the aging Promenade Shopping Mall in Woodland Hills. The project will bring 1,400 units of housing and two hotels to Warner Center.
“It’s always a good thing whenever you can get more housing, but in the last few years a lot of the housing that has gone in close to Warner Center and along the Orange Line has been higher-end housing,” said Mel Wilson, broker and owner of Mel Wilson & Associates Realtors in Northridge.
Many of those units, he said, have been apartments that are too expensive for most middle-class workers.
“Eventually we’ll reach a saturation point where enough people won’t be able to afford housing so builders will have to start building housing that is lower cost and with a smaller footprint,” Wilson said. “And there’s a lot of opposition among homeowners in that area to any major development coming in. They are opposed to higher density because they see an increase in traffic. In the San Fernando Valley, it’s been a tug of war getting any new development.”
Further west, Snap Inc., parent company of Snapchat, expanded and leased 300,000 square feet of space at Santa Monica Business Park. The report also highlights a variety of new construction projects that are underway in downtown Los Angeles, Hollywood and Playa Vista.
Northrop Grumman, which was awarded an $80 billion contract to develop a long-range strike bomber, will be expanding its 1.5 million-square-foot facility in Palmdale with another 340,000 square feet. That’s expected to bring about 6,500 jobs to the Antelope Valley when the planes are built at Plant 42 in Palmdale.
Lance Camper Manufacturing Corp., which makes high-end truck campers, travel trailers and toy haulers, is also expanding. The company recently acquired an additional 61,000 square feet of industrial space adjacent to its existing 110,000-square-foot headquarters.
“Our industry has been in a growth mode for the past four to five years,” said Bob Rogers, director of marketing. “We already acquired the additional building and we’re in the middle of renovating it. We’re getting the equipment to install. When you count our parts and service facility and our warehouse, we’ll have about 225,000 square feet of total space.”
Lance Camper employs about 520 workers and produces about 15 recreational vehicles a week.
Bang Printing, one of the largest book manufacturing companies in the U.S., has relocated to a 130,000-square-foot building in Palmdale and CarMax has completed construction of its first Antelope Valley dealership, bringing 60 new jobs to the region.
The report also highlights commercial activity in Long Beach.
WeWork, a $16 billion tech startup that leases out offices to other startups, freelancers, creatives and innovative companies, recently opened a 33,000-square-foot co-working location in the city’s downtown area. In 2016, the city issued building permits valued at more than $421 million. Seventy percent of that is slated for commercial construction and 30 percent is earmarked for residential use.
Port of Long Beach sees spike in imports
The report also notes that the Port of Long Beach — a major driver of employment and economic activity in the region — closed 2016 as its fifth-strongest year ever. The port employs nearly 30,000 workers. That accounts for about one in every eight jobs in the city, and the port supports nearly 316,000 jobs throughout Southern California.
More recent figures show that containers arriving in Long Beach with products bound for U.S. consumers spiked 20.2 percent in March compared with the same month in 2016, pushing the port to its best first quarter since 2007. All segments of containerized cargo grew year-over-year in the opening quarter of 2017, with imports increasing 2.1 percent, exports rising 0.4 percent and empties up 1.5 percent.
“We see a lot of upside for the remainder of 2017 as we expand our partnership with the world’s second-largest line, Mediterranean Shipping Co., add new business and strengthen our relationships with our partners,” Long Beach Harbor Commission President Lori Ann Guzman said in a statement earlier this month.
Further east, the Inland Empire/Victorville region experienced net absorption of 147,232 square feet of retail space last year, including 51,560 square feet of new retail operations.
Land activity also ramped up, the report said, with a nearly 52 percent increase in sales volume over 2015 and an 84 percent increase in the number of transactions. That trend is expected to increase in 2017 with a focus on industrial and residential parcels.
Amazon plans to build a second 1.1 million-square-foot fulfillment center in San Bernardino, a move that’s expected to create many jobs. And Riverside County currently has more than 7 million square feet of industrial buildings under construction.
Eastern Orange County’s industrial market tightened in 2016, the report said, with an industrial vacancy rate of 2.4 percent at the close of the third quarter. That was a 20 basis-point reduction from where it stood at the close of 2015. That rate is expected to remain low, as the county has a very limited supply of available space.