Developers are scheduled to break ground today on a $40-million industrial project in Valencia, underscoring how the growing Santa Clarita Valley community is on track to eclipse some of its San Fernando Valley neighbors as an industrial center.
The new project is Vista Business Park, which will eventually include 730,000 square feet of industrial space on 36 acres in Valencia Commerce Center at the intersection of Interstate 5 and California 126. Los Angeles-based developer Investment Development Services will start work on the project's 320,000-square-foot first phase, which IDS says will be completed in September. IDS is developing the project on behalf of Kennedy Associates Real Estate Counsel, a Seattle-based pension fund advisor.
The development company is building on a speculative basis--meaning no tenants have been signed, said David Mgrublian, IDS' managing director. He predicts there will be ample demand for new industrial buildings in Valencia, where the vacancy rate for such space is about 2%. Generally, commercial real estate experts believe any industrial vacancy rate below 10% warrants new construction. With the vacancy rate at such an exceedingly low level in Valencia, he said, lack of new buildings has stymied growth in the market.
Although Valencia is best known as a residential community and the home of Magic Mountain theme park, the city has the fifth-largest industrial base of any San Fernando Valley sub-market, with about 11 million square feet, according to studies by CB Richard Ellis and Grubb & Ellis Co. Those surveys rank Valencia behind Chatsworth, Van Nuys, Burbank and North Hollywood in total industrial square footage.
But Valencia has the potential to rival all those markets in size, according to Jim Linn, a Grubb & Ellis vice president and a member of the marketing team for the IDS project. Linn said Valencia has abundant land on which to build new industrial properties, while relatively little is being built in the San Fernando Valley.
"A tenant who wants 30,000 square feet of modern industrial space is hard-pressed to find it anywhere else in the Valley," Linn said. He said the key word is "modern," because many of the buildings in other Valley markets are older and less desirable. With continuing demand from San Fernando Valley companies to expand into more modern facilities, Linn said, Valencia's industrial market could easily grow to the size of larger Valley markets.
Meanwhile, Valencia-based real estate company Newhall Land & Farming Co. and the developers to whom it sold land have about 1.1 million square feet of industrial space under construction in both build-to-suit and speculative projects in Valencia, said spokeswoman Marlee Lauffer. Newhall Land has acreage and entitlements for another 11 million square feet of industrial space, she said, so the Valencia total could reach 22 million square feet. The San Fernando Valley's largest existing industrial market is Chatsworth, with approximately 20 million square feet.
Valencia's industrial real estate clout is little known because attention has tended to focus on its residential and retail developments, Linn said. Valencia has one of the few regional shopping malls to be built in recent years, Valencia Town Center. Its Town Center Drive, a $100-million project, includes shops, offices, apartments, movie theater and hotel. Town Center is being created by Newhall Land & Farming as a "Main Street" that will serve as the center of the community.
Linn said these residential and retail facets of Valencia are important factors driving the industrial and office markets.
"Quality of life and availability of land are the two major factors out here," he said, pointing out that FBI statistics rank the community as one of the safest in the country.
According to Steve Robertson, formerly a principal at J.M. Pearson & Associates commercial real estate brokerage in Valencia, the growing industrial market is one of the reasons Pearson sold his company to Woodland Hills-based Told Partners Inc. last week.
Robertson, who is now a broker in Told's Valencia office, said the commercial real estate firm "wanted to break into a market that is hot and emerging."
Unlike the demand fueling the construction of huge warehouse distribution centers in the Inland Empire and in central Los Angeles County, most of the call for industrial space in Valencia comes from small and mid-sized firms that need less than 100,000 square feet, Robertson said.
While most of the action has occurred in the industrial arena, Valencia has attracted some new office users. Among the most notable is Princess Cruises, the West Coast's largest cruise line, which is moving its customer service operations to a building next to Valencia Town Center. The cruise line signed a 15-year lease for the six-story building, where it is expected to house 700 workers. Princess will keep its administrative operations and approximately 300 employees in Century City.
Other office users could be on their way to Valencia, according to Robertson and other observers. Plans were announced recently by PacTen Partners, a Glendale-based developer, to build a 700,000-square-foot campus-type project to be known as Valencia Corporate Point.