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San Fernando
Thursday, Jun 8, 2023


CHRISTOPHER WOODARD Staff Reporter The San Fernando Valley appears to be the victim of its own prosperity. While the area has enjoyed a net gain in jobs in recent years, a spate of companies are moving out because they can’t find available space for expansion. Some business leaders fear the moves could be the start of a trend in which more companies would be driven out of the Valley by the lack of developable land, or by high L.A. taxes and government red tape. “It’s so easy for a company just to move out of the San Fernando Valley,” said Bob Meyler, president of the United Chambers of Commerce of the San Fernando Valley. “In Westlake Village, Calabasas, Burbank, the taxes are lower and the companies don’t have as much other stuff (bureaucracy) to put up with.” Netcom Systems Inc., a developer of analysis products for the computer networking industry, announced it is moving to Calabasas after running out of room at its Chatsworth headquarters. Pinkerton’s Inc., the security firm that employees 47,000 people around the world, is moving its headquarters from Encino to a 68,000-square-foot office building in Westlake Village, where 200 employees will work. Casual shoe maker K-Swiss is packing up its Chatsworth headquarters and running to Westlake Village as well, costing the San Fernando Valley another 85 employees. City officials are taking the moves in stride. Dan Margolis, a spokesman for the Mayor’s Office of Economic Development, said he is not overly concerned about the announcements because the companies are relatively small, and it’s all part of the normal ebb and flow of business. “When you have thousands of companies out there, one or two are going to leave,” he said. In fact, by all indications the San Fernando Valley’s economy and employment picture are looking bright, said Jack Kyser, chief economist with the L.A. County Economic Development Corp. Office vacancy rates for the San Fernando Valley as a whole stood at 11.6 percent in the latest quarter, down from a high of over 15 percent in 1992, according to Grubb & Ellis Co. Meanwhile, the industrial sector is booming, with a vacancy rate of only 3.3 percent as of the end of the second quarter. In 1993, Valleywide industrial vacancy stood at 15 percent. Lower vacancy rates indicate the Valley has seen a net increase in jobs in recent years, said Kyser. But at the same time, he agrees with Valley business leaders that it’s important that the city and its leaders avoid becoming complacent about retaining business just because the economy has rebounded. “The city has dropped its guard,” said Kyser. “What this tells us is, we have to do economic development when times are good as well as when times are bad.” Kyser said the announced moves may seem unimportant to some because the companies are staying within the greater San Fernando Valley region, but each time a company moves out of L.A., the city loses an important source of tax revenue that results in fewer resources to improve amenities or reduce traffic congestion. Chamber of commerce officials like Meyler suspect the moves are being driven in large part by the business environment in Los Angeles, where companies face higher taxes and a more cumbersome permitting process. According to a study by Kosmont & Associates Inc., a typical high-tech company occupying 30,000 square feet of space, with 100 employees and $10 million in annual revenues, would pay nearly $30,000 a year in various business taxes in Los Angeles. The same company would pay $8,730 in Calabasas, $1,460 in Thousand Oaks, $35 in Agoura Hills and nothing in Westlake Village. “We’ve been hearing about this (tax issue) for years,” said Pam Campeau, chief executive of the Chatsworth/Porter Ranch Chamber of Commerce. “What it boils down to is, Los Angeles is not business friendly.” But officials at Netcom and K-Swiss said neither the issue of taxes nor the general business environment in L.A. had anything to do with their decisions to leave. Their moves were both keyed on the Valley’s dearth of available industrial space. Steven Nichols, president of K-Swiss, said it was impossible to find suitable property for expansion when the company outgrew its Chatsworth headquarters. “What’s happened in the Valley reminds me of something Yogi Berra (the New York Yankees player and coach) once said: ‘That restaurant’s so crowded, no one goes there anymore,’ ” Nichols said. In Westlake Village, the company found a site in a business park with enough space for a $6 million, custom-built headquarters building with a view of the Santa Monica Mountains, he said. The company plans to move into the new building this month. Business fees and taxes may not have been the reason for the move, but the tax break in Westlake Village came as a nice perk, he said. “We just like the environment there,” said Nichols. “It just seems to be a quality, upscale area.” Gil Cabral, chief financial officer for Netcom, agreed that there simply isn’t enough available space in the Valley to accommodate growth. Netcom was looking for 100,000 square feet under one roof after outgrowing its 50,000-square-foot building in Chatsworth. Calabasas made sense because it’s close enough for Netcom employees to commute, and the new office will be located in the Ventura (101) Freeway high-tech corridor, offering the synergy that comes with working near other high-tech companies, Cabral said. “The Valley is pretty much built out,” said Nigel Stout, senior associate at Grubb & Ellis, who said the Netcom scenario is a recurring one. “The San Fernando Valley is a great area for start-up companies, but when companies reach a certain size, say 100,000 square feet, options in the area are very limited.” Jerry Katell, president of Katell Properties, developer of Warner Ridge an office/residential development planned for Woodland Hills said it’s almost as if the Valley is being punished by its own prosperity. “We’re seeing a lot of growth across the board with San Fernando Valley firms, and a limited supply of buildings to expand to,” he said. Meyler sees the number of companies leaving the San Fernando Valley “as a very serious trend” and said the biggest impediment to making the Valley more business-friendly is the city of Los Angeles. The City Council in the past has balked at reforming the city’s burdensome tax structure, leaving the Valley only two real options for change: charter reform or secession, he said. Meanwhile, the growing cities in the adjacent Conejo Valley are taking advantage of the situation. Ray Taylor, city manager of Westlake Village, said he would like to say the city has a sophisticated economic development team in place to woo businesses to town, but the truth is that the city doesn’t need one. Westlake Village has no business taxes, not even a business license fee, the city brags of a no-hassle permitting process, and it has excellent schools and a low crime rate, he said. Charles Kate, city manager of Calabasas, cited the same attributes in explaining his community’s attractiveness to business. “We pride ourselves on our small-town ability to process applications,” he said.

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