Ownership Is King in San Gabriel Valley

Statistics show the sales and leasing of industrial buildings slowing in the San Gabriel Valley as they are elsewhere in the Los Angeles Basin, but there is at least one segment of the market in which supply can’t keep up with demand.

Entrepreneurs who want to own their own industrial buildings are having a hard time finding something to buy.

The San Gabriel Valley has one of the region’s heaviest concentrations of small businesses that prefer ownership to paying rent, according to Jim Center, a longtime industrial broker in the valley for Grubb & Ellis.

These owners typically are looking for buildings of 5,000 to 25,000 square feet, a size that’s in short supply partly because of a lack of vacant land in the valley, Center said, and partly because those who own such properties want to keep them.

Center cited a recent deal: “In the first two weeks after we got the listing, we had eight showings [to prospective buyers].” Within three weeks, the 30,000-square-foot industrial building was in escrow.

The demand is a continuation of a trend that began about 10 years ago, Center said, in large part because of the influx of Asian and Asian American entrepreneurs whose businesses have continued to grow. Latino entrepreneurs have boosted that growth, noted Frank Marquez, chief executive of the Irwindale-based San Gabriel Valley Economic Partnership.

One such growing company is Office Master Inc., based in La Verne, which manufactures office chairs. The company was leasing 43,000 square feet in a Pico Rivera business park in 1996 when it decided to look for a building to buy to consolidate under one roof, said Bill Chow, Office Master’s chief executive.

“We looked for two years, but we couldn’t find an existing building,” Chow said. Several times, he said, Office Master came close to buying a building, but the sellers changed their minds and decided to keep their properties.

Finally, in 1998, Office Master bought a new, 68,000-square-foot building constructed to its specifications by Baldwin Park-based developer Johnny Mohr at San Polo Business Park in La Verne.

“Most of our buildings are sold before they are finished,” said Mohr, whose San Polo Development Corp. has completed and sold more than 50 buildings ranging from 10,000 to 70,000 square feet in the 100-acre San Polo Business Park. The company built and sold 15 buildings last year and will complete an equal number this year, Mohr said.

Mohr develops buildings to sell rather than lease, he said, because demand is so great among prospective buyers. He and Chow both said a large percentage of Asian entrepreneurs prefer to own rather than rent.

“It’s part of Asian culture,” said Mohr, a native of Taiwan.

But regardless of cultural influences, according to Chow, “It makes sense for almost any prudent businessperson to own,” because of the savings on rent and other advantages such as depreciation deductions and the value of the property as an asset of the company.

The demand by Asian buyers reflects the diversity of the San Gabriel Valley, according to Marquez, who said about 20% of the valley’s residents are Asians or Asian Americans and about 50% are Latino.

That diversity, Marquez noted, has produced a growing ethnic food-processing industry that accounts for some of the demand for industrial buildings.

Among the other types of businesses looking for space are computer and electronics firms, printing companies, medical device makers, importing and exporting firms, furniture and clothing companies, and a broad spectrum of light industrial and assembly operations, according to broker Center.

As of midyear, total sales and leasing of industrial buildings in the valley had dipped to nearly 2.2 million square feet, down slightly more than 2% from a year earlier, Grubb & Ellis reported. The industrial vacancy rate actually improved to 3.8% from 3.9% during that time, but asking rents dropped to an average of 42 cents versus 49 cents per square foot per month.

Those statistics show that the valley is holding its own, Center said. It is one of Southern California’s largest industrial markets, at more than 155 million square feet, but with relatively little vacant land left for expansion--although Marquez pointed to sites in Pomona, Irwindale and Azusa that are suitable for development.

What the numbers don’t show, Center said, is that industrial activity--people looking at properties and making offers--has definitely picked up since Memorial Day.

“It’s not a blazing increase,” Center said. “But it’s steady.”