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Friday, Mar 29, 2024

HERE—To Some, 101 Tech Corridor Has Silicon Valley Beat

The San Fernando Valley’s low-risk, slow-growth high-tech industry may lag behind the go-go dot-com mentality and intense computer soft- and hardware focus of Silicon Valley. But its 101 Tech Corridor is clearly, albeit slowly, emerging as an economic hub in its own right. And, while an economic slowdown has belted the San Francisco Bay area harder than almost any metropolitan region in the United States, the Valley’s tech corridor has remained relatively insulated and appears poised for significant growth over the next decade. But there are other, more tangible reasons why some of the Valley’s tech firms say doing business here instead of in Silicon Valley has its advantages. Among them: – Commercial lease prices for research and development properties are roughly four times higher in Silicon Valley than they are here. – The average median home price in Silicon Valley is nearly double that of a home in the San Fernando Valley. – The focus in the 101 Corridor is on more stable, back-end products expected to generate more jobs in the future. According to a report released last year by the Los Angeles Regional Technology Alliance (LARTA) called “How Green is Our Valley,” the 101 Corridor is home to 600 technology-related companies, which employ about 115,000 workers. Chatsworth has the highest number of tech firms at 108 with 8,574 workers, according to the report. And Silicon Valley may have roughly 4,000 IT-related firms but, since its birth following the demise of the defense and aerospace industry roughly two decades ago, the 101 Corridor, stretching from Sherman Oaks to the Conejo Valley in Ventura County, has managed to reinvent itself as a tech player to be reckoned with. In 2000 the region ranked 46th out of all metropolitan areas in the country in terms of technology output, according to the LARTA report, offering a litany of perks that even Silicon Valley, the so-called technology epicenter of the world, had long touted as its primary attractions. The 101 Corridor is now considered home to a concentrated, highly educated and fast-growing labor pool. Bolstering that reputation is Cal State Channel Islands, a new state university campus in Ventura County with an emphasis on technology, expected to begin admitting students in 2002. While the domino effect of failed Internet ventures and sharp cuts in tech spending by big U.S. firms has resulted in layoffs at long-established Silicon Valley giants like Hewlett-Packard, Intel Corp. and Cisco Systems Inc., the San Fernando Valley has so far managed to avoid deep cuts. Some industry experts say the 101 Corridor’s concentration on back-end tech products has kept companies here afloat in tough times and will help set the stage for a quick recovery. “Companies have been setting up their businesses here in the San Fernando Valley and along the 101 Corridor for the last two decades because of a strong concentration of labor. That’s very crucial,” said Victor Hwang, chief operating officer of LARTA. “But the sort of slow and steady growth of the 101 Corridor is actually proving to be a much better way of doing business for the long term. “In many ways this area has done much better throughout the downturn than the Silicon Valley, because the companies up there are willing to take big chances and big risks, while the tech companies here in contrast are those which seem a little slower. But in reality they are just busy building a strong base of customers over time.” Office vacancy rates in the Silicon Valley are reported to be hovering at the 10 percent level, while here they are closer to 4 percent. And, according to Bing Heckman, vice president for CB Richard Ellis in San Jose, leases for typical research and development properties shot up from $1.80 to about $5 per square foot between 1999 and 2000 in Silicon Valley suburbs like Sunnyvale and Mountainview. The average lease price for similar property in the Conejo Valley, where the bulk of the 101 Corridor’s R & D; companies are located, was 89 cents per square foot at the end of the second quarter, according to Colliers Seeley. In Santa Clara County, the median home price was reported to have hit $505,000 at the start of this year. Single-family homes in the 101 Corridor, on the other hand, have also remained at affordable levels with a median price in 2000 of $291,000, according to the LARTA report. Quality of life issues, like affordable housing, but also the proximity to a large metropolitan city, temperate weather and room to grow were big draws for West Hills-based ValueClick Inc., which decided against Silicon Valley last year when it moved its headquarters from Santa Barbara to West Hills. Elise Arthurs, the company’s vice president of global marketing, said her firm also looked at Las Vegas before making the move south. She said the decision was made to protect long-term employees from having to relocate. “We wanted to offer our employees in Santa Barbara the opportunity to hold onto their jobs and do the commute,” Arthurs said. “We didn’t retain every one of them, but many of them are still here. I think there are about five of us who make the commute each morning.” ValueClick has roughly 200 employees world wide, with roughly 80 in its Valley office. ValueClick does have a sales office in Silicon Valley, as well as in New York, but Arthurs said the Valley made better sense as a home base because its tech cluster is still just getting started. “We could have become another Silicon story, but we really think there is room to grow here,” she said. Zuma Networks in West Hills is one of about 25 tech startups incubated over the last few years by Chatsworth-based MRV Communications. According to Russ Hertzberg, vice president of marketing for Zuma, his company has grown to 80 employees since it began in 1999. He said it’s been MRV’s strategy all along to shun both the dot-com bubble world of Silicon Valley and high-risk, fast-paced business models. “We never really thought that the big dot-com rage was a reality for very long,” said Hertzberg. “We are in it for the long run at Zuma and the long run at MRV. Some of the cycles are beyond our control, but we hunker down and focus on what it takes to build a strong company.” “We also like this area a lot because of the talent pool which is much less expensive than in Silicon and there is a long history of businesses here that have worked on the back end of the infrastructure of telecommunications and IT technology,” said Hertzberg. “So we see it as a hotbed for growth.” But the area has issues to contend with, simply by virtue of its geographical layout and its relatively early stage of development. One key concern among businesses interviewed for the LARTA report was the fact that unlike the concentrated region of Silicon, the 101 Corridor is really a cluster of several different tech communities ranging from biomedicine and electronics manufacturing to computer software and hardware development and telecommunications. “Our biggest challenge is communication between the different clusters,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corp. “Because we are really a tech sector made up of many different clusters or groups of different environments, we end up needing to work much harder to develop a sense of community.” There are also technical limits here yet to overcome: traffic along the 101 Corridor is already in overload and, although telecommunications capabilities are improving rapidly, many companies at the west end of the Valley say they still are having trouble getting reliable high-speed Internet access. And, the demand for commercial space along the 101 Corridor is expected to result in an inevitable increase in demand for residential space, which could drive up home prices. As a result, the 101 Corridor will have to find a way to balance the “green” effect with the decrease in available housing and office space, Kyser said. On the plus side, Kyser predicted the cost of doing business here will actually decrease over the next five years as new technologies come on line that are expected to make tech-related manufacturing more cost-efficient, particularly in the area of telecommunications. And many of those technological advances, Kyser said, are expected to be made by Valley-based companies. In addition, Kyser said, The Boeing Co. has just signed a 20-year, $25 billion contract to build sophisticated reconnaissance aircraft for the military, and part of President George W. Bush’s spending plan calls for increased funding for military research. Those and related projects, said Kyser, are expected to create a trickle-down effect in terms of jobs in research and development. And, because the Conejo Valley is home to the bulk of Southern California-based R & D; firms, the 101 Corridor is expected to be a key player. “We are predicting that those needs for research and development will filter through over about a five- to 10-year period and that has enormous implications for the Valley tech sector,” said Kyser.

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