Demand for industrial space in Los Angeles County remains high, but development is not keeping pace. Instead, large-scale industrial projects are going to the Inland Empire, where empty land is plentiful and most local governments have open arms.

The trend is distressing to the Los Angeles Economic Development Corporation and some other business boosters, who note that Los Angeles County manufacturing employment has declined in recent years. The manufacturing segment now accounts for only about 13% of jobs in the Los Angeles County, down from 19.5% only 10 years ago, according to the state Employment Development Department. Those figures reflect the loss of about 200,000 manufacturing jobs, mostly in the electronics and aircraft industries.

While worldwide economic forces helped alter the composition of L.A. County jobs, several local factors are influencing land development. First, the urbanized portion of Los Angeles County has few vacant sites remaining. Second, redevelopment or reuse of old industrial sites by new industry has proceeded slowly. And, third, local government has encouraged retail development on former industrial sites.

Last year, the LAEDC issued a report that said the county as a whole needed to develop up to 21 million square feet a year of new space to accommodate manufacturing and technology jobs. Yet the county was seeing only about half that amount of space developed. Since then, the situation has not changed and vacancy rates have only gotten lower, said Jack Kyser, chief economist for the LAEDC.

"The overall industrial vacancy rate in Los Angeles County is down to about 4.7%, which is extremely low," Kyser said. The vacancy rate is even lower in central Los Angeles, Long Beach and the San Gabriel Valley, he said. "There's just not much developable land," said Steve Bloom, a Los Angeles commercial real estate analyst. "That's why the Inland Empire is doing so well."

This lack of greenfield sites has caused the LAEDC to focus on "recycling" of older industrial lands. The organization is working on a prototype because environmental cleanup regulations and permitting procedures related to reuse of industrial sites remain ponderous and because local opposition to these projects is common, Kyser said.

The LAEDC is especially looking at the Alameda Corridor, a 20-mile-long strip of industry that runs north from the Los Angeles and Long Beach harbors. Extensive rail and truck routes are being constructed to streamline transportation, so heavy and light industry are perfect fits. A number of underused industrial properties lie along the Alameda Corridor, but there has been little talk of recycling them, Kyser said. Bloom said some older sites are difficult to reuse because of obsolete building or parcel configurations. Also, older builders oftentimes are too small for new industries, which want gigantic boxes, he said. And in some instances, transportation corridors have moved away from old industrial districts, he added.

The LAEDC also blames cities' focus on sales tax revenue as a hindrance to industrial development. Kyser and other economists argue that a healthy local economy needs a broad range of jobs. Much of the retail development that cities chase results in low-wage jobs. Manufacturing jobs typically pay more, so they bring more money to town, Kyser explained. "This sort of fits into the ongoing debate about job quality in California," Kyser said.

A closed General Motors plant in Van Nuys presents something of a case in point. While some of the site was redeveloped for light manufacturing, much of it was converted into "The Plant," a large retail center. Some analysts see a former NASA site in Downey as another lost opportunity. NASA built much of the Space Shuttle and the Apollo equipment in Downey. Now, the city is negotiating with a developer to build retail space, high-tech office space, film industry facilities, schools and a park. David Rodriguez, the city's project manager, said none of the six developers who made proposals mentioned heavy industry for the site, and the city did not pursue it. But he said Downey should get credit for not pursing warehouse and distribution centers, which would have been quickly absorbed but would not have offered the skilled jobs that the proposed project will provide.

All of this is not to say that industrial development has ceased in Los Angeles County. A 3.1 million-square-foot project is moving forward in the Dominguez Technology Center in Carson, and the 265-acre Golden Springs Business Park is under construction in Sante Fe Springs. But a good portion of the action is in eastern L.A. County, which is linked to the Inland Empire.

A recent report on the San Gabriel Valley by Colliers Seeley, a commercial real estate broker, found that industrial demand was greatest in the Chino submarket, which includes slices of eastern Los Angeles and western San Bernardino counties. That same vicinity contains one of the region's largest industrial projects, called Industry East. Majestic Realty plans to develop 31 buildings ranging from 3,500 to nearly 900,000 square feet apiece during the next 10 years. Still, Kyser, the guru of the Southern California economy, remains concerned. While Riverside and San Bernardino counties snap up industrial growth, the more volatile retail and service sectors expand in Los Angeles County.

"He who lives by the retail development dies by the retail development," Kyser warned.


Jack Kyser, Los Angeles Economic Development Corporation, (213) 236-4820. Steve Bloom, Real Estate News Television, (310) 414-0404. David Rodriguez, consultant to the City of Downey, (626) 304-7891. California Employment Development Department website: