Modern Advice: : Go East, Young Business Person

After being in Monterey Park for 20 years, Robert Cope’s computer services business was bursting at the seams.

Auto-Graphics’ cramped quarters in the 700 block of Monterey Pass Road was half the space that the $10-million-a-year business needed, Cope said, and, besides, it was too far away from Ontario International Airport, which he preferred over Los Angeles International to ship products.

The move east to a business park in Pomona was “110% positive,” Cope said, especially because it meant half as long a commute, against traffic, for his 150 employees, most of whom live in the eastern San Gabriel Valley.

For Philip Vaughan, a manufacturer of drafting equipment, it was available, cheap property that lured him to San Dimas from Pasadena, where there is almost no vacant industrial land and where construction costs are among the highest in Los Angeles County.

“It’s the only way you can go if you have to move,” he said. “There’s no contest.”

Bargain Rates

Slowly, the east San Gabriel Valley is becoming a mecca for businesses suffocated by the squeeze of development on the west. To some, moving to the east means bargain rates for large tracts of industrial and office space. To others, it simply means following upscale residential growth that’s taking place in the bedroom communities of Walnut, Diamond Bar, Hacienda Heights, Rowland Heights and Glendora.

The Southern California Assn. of Governments predicts that by the year 2010, the number of jobs and people in the east valley, from the San Gabriel River Freeway (605) east to the Los Angeles County line, will have grown more than twice as much over 25 years than in the west valley.

According to a SCAG forecast to be released this month, areas likely to witness the most development are San Dimas, where SCAG predicts that the population will grow 103% between 1984 and 2010 and where 55% more jobs will be created in the same time period; La Verne, where the population and employment will increase by 79% and 39%, respectively, and Walnut, where the population will grow 250% and jobs 32%. People are already inching their way eastward. Between 1980 and 1988, population in the east valley grew almost twice as fast when compared to the west; in the east, it climbed from 688,055 to 825,900, a 20% increase, while in the west it grew 11.5%, according to figures from the Los Angeles County Department of Regional Planning.

Jim Center, a senior marketing consultant at the financial consulting firm Grubb & Ellis, said that as land in Pasadena, Monterey Park and Alhambra becomes more scarce, the area east of the 605 Freeway will become the focal point of business activity in the county.

‘Hub of the Wheel’

“The 605 and Pomona (60) freeways are like the hub of the wheel, with downtown as the west rim and Ontario (in San Bernardino County) being the east rim,” he said.

Casey Griffin, an industrial broker specializing in sales transactions west of the Orange (57) Freeway for Coldwell Banker, said eastward drift is “a natural course of business. Since there’s a limited industrial base west of the 605, most new developments are in Walnut, San Dimas, Glendora. In essence there’s a greater selection in the east San Gabriel Valley because it’s the most recent area to be developed.”

There are those on the west who insist that it’s not a mass exodus, and the trickle isn’t anything to be alarmed about.

“Nobody wants to leave Pasadena,” said Bruce Ackerman, executive vice president of Pasadena’s Chamber of Commerce. “It’s not a burning desire to get out of town.”

Although traditional industrial users may be moving east, “there’s no reason for the commercial to go out east,” said Alhambra Redevelopment Agency Executive Director Michael Martin, arguing that successful businesses that can afford the higher land prices tend to stay in the west.

“One of the advantages of being in an urbanized area is that most retailers looking for quality commercial space like it here because people here are willing to spend money,” he said.

Martin added that an eastward drift of industrial companies hasn’t hurt Alhambra’s economy because for every business that moves from Alhambra to Glendora, there’s another moving from downtown Los Angeles to Alhambra, which is still relatively inexpensive compared with downtown.

Nevertheless, the trend worries cities that are losing the businesses. In Pasadena, for example, officials feared that auto dealers, one of the largest generators of sales tax revenue, would be lured eastward to Duarte, Monrovia and Glendora, which boast shiny new auto malls close to the Foothill Freeway.

To entice dealers to stay on Colorado Boulevard, the Pasadena Board of Directors is offering sales tax rebates of up to 50%.

City officials hope that the incentive will reverse a steady decline in sales tax revenue from auto dealers at the same time that the total sales tax revenue has gone up. Auto sales tax revenue in Pasadena slipped from $3.03 million in fiscal 1986-87 to $2.81 million in 1988-89.

In the east, cities are providing their own strong incentives. San Dimas’ Redevelopment Agency has given generous financial support to businesses moving to the city. Recent help included issuing tens of millions of dollars in bonds for the construction and acquisition of buildings for an engineering firm and the Bushnell Division of Bausch & Lomb, the nation’s leading manufacturer of sports optics.

The upper-middle-class bedroom community of Walnut, although zoned 95% residential, is trying to attract businesses to match its burgeoning population, which more than doubled between 1980 and 1988. The City Council recently created an ad-hoc economic development committee to study ways to strengthen the city’s commercial base.

Glendora has been slower to attract residents; its population increased by 22.8% in the same period. But City Manager Arthur Cook said that after a brief spurt of growth during the 1960s, followed by a prolonged lull, “the second wave of it is coming now, especially with the population growth in the east valley. Retail is following that growth.”

With construction under way of an auto mall on Allen Avenue for which seven dealers have signed contracts, the city anticipates annual sales tax revenues to skyrocket $2 million once all nine spaces are filled.

That promise of growth has already brought corporations from Pasadena and El Monte to Glendora in search of economic opportunities, Cook said. Caltrol, an El Monte-based manufacturer of control devices, is moving its entire operation to Glendora, where commercial land, at $15 to $18 a square foot, is half what it would be on the west, he said.

‘Market Is Here’

“The land is cheaper, the rent is cheaper, the market is here, the purchasing power is in this area,” Cook said. “The economic level of Glendora is higher than other areas, but commercial land isn’t as expensive as other areas that are fully developed.”

On the other hand, some in the east say the eastward drift is blowing right past them into San Bernardino County.

While Pomona has found a niche in the marketplace for small manufacturing facilities of less than 25,000 square feet, larger developers have passed it over when looking for places to set up heavy industrial firms, known as “big boxes.” Retail development is similarly scarce, so that Pomona residents typically drive across the county line into Ontario and Montclair to shop for clothing and furniture.

“Those stores don’t exist here,” said Ray Bragg, interim operations manager for Pomona’s redevelopment department. “The downtown Pomona area wasn’t able to keep up with other communities. The buying public goes for the new and the flashy. When Montclair Plaza was built, we sort of lost out to the glitz and the flash.”

But Pomona, too, is trying to fill the gap in its economic base with more retail outlets. Through the efforts of the Redevelopment Agency and the Pomona Economic Development Corp., West Holt Avenue is being transformed from a run-down, underdeveloped stretch of land into a revitalized light-industrial center. Commercial retail centers are sprouting up too, but are mostly concentrated near the higher-scale residential areas of Phillips Ranch and Chino Hills.

Perhaps the trickle eastward can best be explained by a combination of factors. First of all, houses are popping up fast in the east, whether it’s in Walnut and Diamond Bar, where the average house costs $300,000, or in Fontana and Ontario, where homes are more affordable.

Jobs Follow Housing

Naturally, jobs are following the housing tract boom. Although it’s San Bernardino County that’s witnessing the most rapid growth in the nation, according to a recent U. S. Census Bureau report on metropolitan growth, east valley businesses are drawing on the neighboring county’s expanding employee base, according to Center of Grubb & Ellis.

In fact, he said, there’s a dearth of higher-skilled jobs in the Inland Empire, and mid-income-level residents in the Inland Empire are finding more employment in the east San Gabriel Valley’s more diversified economy.

Land prices and office rental rates may not be as cheap as in the Inland Empire, yet are still considerably lower than anything to the west. And the area east of the 605 is a safe distance from gridlock on the Foothill and Ventura freeways, yet isn’t too far away for businesses that need access to downtown Los Angeles.

For example, Randy Hoffman, former president of Bushnell, was able to sell his old building in Pasadena for $22 a square foot and buy space in a San Dimas business park for $8 a square foot. On top of that, the city’s Redevelopment Agency issued $5 million to $6 million in bonds to finance the purchase. Hoffman originally wanted to stay in Pasadena, but there wasn’t any room along Foothill Boulevard to expand and the city couldn’t find another site that permitted 18-wheel trucks easy access to a distribution facility.

‘Real Good Deal’

So Hoffman decided to move east. “We got a real good deal,” he said, adding that he would have saved even more money if he went farther east into San Bernardino County but would have lost too many of his employees, most of whom live in San Dimas, Glendora and Pasadena.

“We didn’t want to be out in the middle of nowhere,” he said. “We drew a circle and said we’d stay somewhere within a 10-mile radius. It was a balance between costs and services. We wanted to be within a few minutes of restaurants and had to be able to draw on local vendors and printing shops, office supply places and banks.”

Although the move wasn’t a great financial loss to Pasadena--Bushnell handles only a limited volume of retail sales--it underscored a dilemma facing cities on the west that have almost reached the saturation point in development, yet aren’t able to retain rapidly growing businesses.

Ninety-nine percent of the developable land in Pasadena and San Gabriel is used up. Ninety-seven percent of West Covina is built on. And only 4% of Monterey Park and 2% of Alhambra is undeveloped. In contrast, Pomona is 10% vacant, Walnut is 21% vacant and in San Bernardino County, Rancho Cucamonga and Ontario are 39% and 26% vacant, respectively.

The scarcity of land in Pasadena is exacerbated by a growth-control ordinance limiting future commercial development in the city to a total of 250,000 square feet a year for projects of more than 25,000 square feet.

Fees Higher

In addition, building permit fees in Pasadena are substantially higher than neighboring cities for all types of projects. In Monterey Park and San Gabriel, temporary building moratoriums have put a hold on residential projects, which city officials acknowledge may indirectly slow commercial growth.

“Certainly we’re concerned when businesses leave Pasadena, especially businesses that generate substantial sales tax revenue or provide employment opportunities, that are out migrating to areas in the immediate region,” said Bill Reynolds, Pasadena’s director of development. “But when a city’s as fully developed as Pasadena, we don’t have the luxury of having cheap land that is readily available and vacant to offer.”

Even Pacific Rim businesses, which for the last decade have flocked to Monterey Park, San Gabriel and Alhambra because of the cities’ large Asian populations, are responding to the eastward drift. A recent migration of Asians to Hacienda Heights, Rowland Heights and Walnut, where housing is often more affordable and available than in Monterey Park, has drawn businesses that cater to the area’s growing Chinese population.

In Rowland Heights and Hacienda Heights, one need only drive down major streets to notice that Asian businesses are popping up. Typically in those areas, once a large Chinese supermarket opens in a shopping mall, small businesses and restaurants follow.

William Chan, president of Great West Realty in Alhambra, said the area around Monterey Park is still an Asian business owner’s first choice, but when he finds out how stiff the competition is, how expensive land is and how restrictive the city’s building code is, he often starts looking elsewhere.

“The competition here is too great,” Chan said. “There are too many Chinese groceries already. There are 200 Chinese restaurants in Alhambra. I for one would never develop here.”

Los Angeles Times

PROJECTED GROWTH IN THE SAN GABRIEL VALLEY Projected growth in population, housing, and employment opportunities in the San Gabriel Valley from 1984-2010.

All figures are expressed in percentages.

Overall numbers include unincorporated areas.

WEST SAN GABRIEL VALLEY AREA

Population Housing Employment West Valley +17.5% +21.4% +26.9% BY CITY 1. Pasadena 17.0 18.2 18 2. South Pasadena 20.7 18.3 20 3. Alhambra 62.7 63.2 23 4. Monterey Park 43.1 51.1 78 5. San Marino -0.2 6.4 9 6. San Gabriel 21.0 24.9 16 7. Sierra Madre 20.7 18.2 7 8. Temple City 19.4 23.2 25 9. Rosemead 20.1 29.8 61 10. South El Monte 27.1 42.7 23 11. Arcadia 15.4 17.0 18 12. El Monte 23.7 34.8 21 13. Monrovia 25.1 26.6 13 14. Bradbury 29.4 35.8 30 15. Duarte 47.6 56.4 22

Diamond Bar is not included because it was not incorporated until 1989.

EAST SAN GABRIEL VALLEY AREA

Population Housing Employment East Valley +44.9% +52.4% +63.6% BY CITY 16. Baldwin Park 48.7 61.0 33 17. La Puente 12.4 21.4 46 18. Irwindale -9.5 0.0 45 19. West Covina 85.8 91.3 43 20. Industry 45.8 62.6 35 21. Azusa 83.6 88.2 33 22. Covina 9.8 10.1 28 23. Walnut 249.9 274.9 32 24. Glendora 19.1 22.2 45 25. San Dimas 103.4 110.6 55 26. La Verne 79.2 84.1 39 27. Pomona 69.7 82.7 64 28. Claremont -0.3 6.0 21

Source: Southern California Assn. of Governments