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Wednesday, Aug 17, 2022

Industrial Expansion

 Nestled in Santa Clarita, the Center at Needham Ranch industrial park has been a success since it opened in early 2020. Yet even then, its development team began to plan Phase II.

By the end of this year, the Center at Needham Ranch, located on Sierra Highway near the Newhall Pass, will have nearly 1.9 million square feet of industrial space. 

The already completed Phase I is comprised of 850,375 square feet and, upon its completion, Phase II will total 1 million square feet. Individual buildings will range in space from roughly 72,600 square feet to 500,000 square feet.  

Needham Ranch, which was developed by Trammell Crow Co. and Clarion Partners, already counts Amazon.com Inc., DrinkPAK, LA North Studios and Illumination Dynamics among its Phase I tenants.

Construction on Buildings 14, 17 and 18 that comprise Phase II will start this spring with a year-end completion date. 

“The horizontal construction is underway, the grading is complete, we’re putting in the underground utilities,” said Trammell Crow Principal John Balestra.

Cost escalation

However, as the developers embark on Phase II, they do so in a more complicated environment with supply chain issues especially regarding imported materials slowing the Phase II timeline.

“Virtually every product that goes into a house or a building – appliances, electrical panels, you name it, it’s in short supply,” Balestra said. “So, there’s a huge escalation in cost as well.”

Added CBRE’s Craig Peters, leasing agent at The Center: “There’s been equivalent increases in construction costs, which are really driving up the underlying costs to deliver buildings today.” 

Demand for industrial buildings has ramped up since the pandemic thanks to the “Amazon effect,” which has made e-commerce more popular, as well as the debut of several streaming channels during the COVID period. 

Entertainment companies and e-commerce businesses are battling over the same buildings, Peters said.

“There’s zero percent vacancy right now,” Peters said. “Which is why we’ve got so many users who are circling these three buildings we’re building at Needham Ranch because very few buildings will be delivered to the market.”

And unlike with other industries, these business clusters must find locations such as Santa Clarita that are adjacent and accessible to Los Angeles proper.

“I don’t think there’s any time when we’ve been seeing so many industries firing on all cylinders like they are right now,” Peters said. “And so, it is really leading to a supply crunch.”

For now, the Trammell team will stay focused on completing Phase II as soon as possible while Peters holds off signing new tenants.

“We have to wait until we know that the building is closer to being completed in order to capture the right amount of rent,” Balestra said. “If you lease too early and the rents keep going up, you’re going to be under market, which no investor wants to do.” 

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.

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