Pier 1 Ontario Project May Be in Works
Ontario may soon see one of the biggest industrial real estate “build-to-suit” developments in Southern California history, according to real estate professionals familiar with the project.
The likely tenant, big international retailer Pier 1 Imports Inc., hasn’t formally committed to the LNR Property Corp. planned development along the Pomona (60) Freeway south of Ontario International Airport. But several sources say that Pier 1 has selected LNR’s 114-acre mixed-use project over other competitors and is now negotiating final terms of the development deal.
The new Pier 1 distribution center would likely include about 900,000 square feet of floor space, ranking the project among the biggest custom developments the region has seen. The would-be tenant and landlord are said to be discussing a 15-year lease for the property--a deal potentially valued at $50 million, based on prevailing and anticipated industrial rental rates in the Ontario area.
A spokeswoman at Pier 1’s Fort Worth headquarters would only say that the company “is negotiating” a deal and won’t comment specifically until a lease is signed. Officials at LNR, the commercial-industrial development operation recently spun off from Miami-based home builder Lennar Corp., didn’t return phone calls from The Times.
Plans for the Pier 1 project illustrate the surge in development activity the region surrounding Ontario Airport has been seeing the last few years, following a slowdown in the early 1990s.
Considered Southern California’s primary distribution center, the west Inland Empire boomed with industrial real estate development when the economy was growing and construction financing was abundant in the 1980s. Then, like so many other Southland property sectors, the Ontario area’s industrial market became sharply overbuilt when the regional economy cooled.
But as the economy finally began recovering in the mid-1990s, the Inland Empire was the first Southland market to see substantial construction activity return. The first larger projects were developed primarily on a customized basis for companies needing additional facilities--with the “user” either leasing the buildings on a long-term basis or agreeing to buy them from the real estate developer. Now the market is home to several speculative projects (started with no tenants signed) as well as major build-to-suit developments.
According to year-end statistics from brokerage Cushman & Wakefield, about a third of the 9 million square feet of industrial space completed in the west Inland Empire marketplace last year was of the build-to-suit variety. Among the bigger projects built in 1997 were a 600,000-square-foot United Facilities complex in Fontana, a 460,000-square-foot project for Ikea in Ontario, and a 410,000-square-foot California Hardware development, also in Ontario.
At year-end, an additional 5 million square feet of industrial buildings were under construction in the west Inland Empire, according to the brokerage. “The challenge for [1998] will be finding tenants” for all the new space, the report stated.
Veteran industrial property broker Darla Longo of CB Commercial Real Estate Group said the Pier 1 project would be one of the Inland Empire’s biggest such build-to-suit deals ever. She added that the amount of industrial space occupied in the booming Ontario area market grew by nearly 7 million square feet last year, with expansions by existing companies accounting for three-fourths of the growth.
Longo said the marketplace has seen rents stabilize at an average 27 to 29 cents per square foot monthly for distribution buildings. She also noted that despite the tremendous amount of development underway and planned for the near future, the Ontario area market is balanced in terms of supply and demand.
Henry Johnson, a senior vice president at big property services firm Trammell Crow Co., said his company is seeing strong leasing commitments at the speculative industrial developments Crow is handling for investor clients in Ontario and Chino. Johnson said developers with Inland Empire projects underway or planned are competing heavily for tenants. He added that nearby projects by Catellus Development and Industrial Developments International have been considered LNR’s strongest competitors for the big Pier 1 build-to-suit deal.
