Trammell Crow to Break Ground on Spec Projects

Betting that strong demand for industrial buildings will continue in and around the transportation hub of Ontario, national real estate services firm Trammell Crow Co. will launch construction this month on nearly 2 million square feet of speculative developments on behalf of its capital partners.

Trammell Crow and Boston-based client GE Capital Investment Advisors will add four buildings totaling more than 1 million square feet within the Rancho Cucamonga Distribution Center III industrial park.

On the opposite side of Ontario International Airport, the Dallas-based company will add five buildings totaling 885,000 square feet to the Centrepointe business park it is developing in Chino on behalf of Seattle-based Kennedy Associates Real Estate Counsel Inc.

Encouraged by strong leasing and buying activity from a growing roster of companies occupying Inland Empire industrial buildings, the developer is going ahead with both projects on a spec basis--that is, without any committed tenants.

The nine new buildings represent investments totaling $75 million to $80 million, said Henry Johnson, the Crow senior vice president and principal overseeing the developments.

Trammell Crow completed a similar amount of Inland Empire developments last year. Users committed to the vast bulk of it by the time building shells were finished, Johnson said. Such corporate giants as Black & Decker, Montgomery Ward and Procter & Gamble occupy some of the newest Crow buildings.

World Bazaar, Pier 1 Imports, Mattel, HomeBase, GE Plastics, GATX Logistics and U.S. Express are among the other companies that committed to major Inland Empire distribution properties in recent months. Overall occupancy of Inland Empire industrial buildings has increased by an average 10 million square feet per year over the last three years, Johnson said.

The latest Trammell Crow developments come on the heels of several major speculative projects recently or soon to be launched by other Inland Empire developers, including Master Development Co.’s nearby 900,000-square-foot Origen Rail Center and Western Realco’s 817,750-square-foot Commerce Way Distribution Center in Fontana.

Johnson said a scarcity of large industrial development sites around the Ontario hub has dramatically boosted land prices--and pushed some large companies farther east. For instance, North Carolina-based home improvement retailer Lowe’s Cos. selected a former sod farm in Perris for its huge regional distribution center, and Philips Electronics North America has a project under construction within the nearby March Air Reserve Base.

Brokerage Grubb & Ellis projects that Inland Empire industrial rents will rise an additional 3% to 4% this year. Average rates now are about 31 cents per square foot per month.

So it’s no surprise that other large development companies boasting of major Inland Empire land holdings--heavyweights Catellus Development and Majestic Realty, for example--have managed to remain active with both speculative and custom-designed “build-to-suit” projects.

Catellus continues to build within its 279-acre Crossroads Business Park in Ontario and 140-acre Rancho Cucamonga Corporate Park, and Majestic is active at its 450-acre Majestic Spectrum in Chino and elsewhere.