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Tuesday, Mar 5, 2024

Meanwhile, Back at the Ranch …

By MICHAEL AUSHENKER Staff Reporter Trammell Crow Co. and Clarion Partners are bulking up the industrial space inventory at The Center at Needham Ranch in Santa Clarita, a 54-acre business park situated on a 132-acre parcel of land. The project’s phase I, which is costing $150 million to construct, currently has one of six warehouses occupied by entertainment industry powerhouse Illumination Dynamics. Two more buildings are ready for immediate move-in and another three structures are under construction by mid-2020. However, anticipating huge demand for state-of-the-art warehouse space in Santa Clarita Valley, John Balestra of Trammell Crow and CBRE’s Craig Peters told the Business Journal that, come summer, the joint venture partners will officially kick off construction of a second phase, bringing as many as nine or 10 more industrial buildings online. The first six buildings alone total 451,500 square feet. Marvel Entertainment parent company Walt Disney Co., as well as fellow Burbank-based movie studio Warner Bros. Entertainment and Comcast Corp.-owned Universal Studios in Universal City are indirectly behind the Center’s expansion. The property, just down the 14 freeway from Disney’s 890-acre Golden Oak Ranch in Newhall, intends to benefit from the ongoing streaming wars, which has fueled a surge of soundstages as demand for shows on these entertainment channels continues full throttle. Last November, Disney launched its Disney Plus streaming service, and with Warner Bros. and Universal debuting HBO Max and Peacock, respectively, in the second quarter — plus other players such as Quibi and Apple entering the fray — demand for places to create more television series is high. Simultaneously, Amazon.com Inc., Walmart Stores Inc. and other e-commerce kings are dominating retail and need distribution centers, and manufacturers of such products as medical devices and cosmetics are experiencing robust business. Meanwhile, the defense industry is another area where business in Santa Clarita is spiking. “It’s what the San Fernando Valley was born on,” Balestra said, while noting that the Valley is no longer a viable base of operations or thoroughfare because of the congestion along its freeways. The current defense budget, once approved, will be the largest in history and will drive more manufacturing, Peters added, amounting to a very rosy picture. “This is one of the few times where you see all (industries) firing on all cylinders,” Peters said. Last year, upon the announcement of Illumination Dynamics signing a lease at the Center, Santa Clarita Valley Economic Development Corp. President Holly Schroeder said in a statement, “We were so happy to assist Illumination Dynamics and help them understand the many benefits the area offers including a substantially lower cost of doing business. They are exactly the type of company we want to see move here and further proof the Santa Clarita Valley is an ideal location for the entertainment industry.” The reason why Santa Clarita has been so gung-ho about this development is the jobs it will bring to the region once all buildings are fully leased. CBRE’s Peters, who with colleague Doug Sonderegger sealed the 67,000-square-foot Illumination Dynamics deal at The Center, said soundstages are being sought after by the studios and “guys that support soundstages.” Illumination Dynamics is one of those “guys.” The company, which provides lighting, grip, generators and power distribution services to the motion picture, live entertainment, sports broadcast and special events industries, is a wholly owned subsidiary of ARRI Group, an employer of approximately 1,500 staff worldwide. Filling buildings Four months ago, phase I officially took flight after the Illumination Dynamics move-in. If all goes according to plan, all of the phase I buildings will be leased and occupied by the end of the quarter. CBRE is close to signing tenants for building 2 with 172,324 square feet and No. 3 with 212,236 square feet. Meanwhile, negotiations for building 5 with 126,439 square feet and 6 with 97,357 square feet will continue through the end of March. A tenant for building 4 has not yet officially signed, however, the undisclosed company should soon be assuming 125,000 of the structure’s 194,000 square feet. Tenants will move into buildings 2 and 3 immediately, while those claiming space in buildings 4, 5 and 6 will settle in by end of the second quarter, Peters and Balestra predict. Balestra, a principal at Trammell Crow’s El Segundo office, said phase II will address “another 110 acres, another 1 million square feet” of commercial space. Peters added that phase II buildings could either house individual entities or comprise a campus for one sprawling tenant. Phase II originally sought to create a dozen structures total; however, the developer changed direction on the layout and three of the buildings were scuttled. What’s attractive to companies seeking industrial space is the height at Needham Ranch. Warehouses have been gradually scaling up from 24 feet to 28 feet. The new set of buildings will allow companies to go from 30 feet to 36 feet. “That’s a big plus for these distribution guys – there’s actually a cost savings,” Balestra said, explaining how that extra clear height and volume is offering tenants more bang for their buck. “These buildings are bigger. We’re dealing with size of the buildings that the market demands.” Accessibility to all points will be a major sales point in leasing up the Center at Needham Ranch, according to its representatives. Peters noted that being at the crook of the 5 and 14 freeways, plus not far from 101 freeway alternatives such as the 118, 126 and 210, gives The Center its edge over many sites. “Within 30 minutes, you can get to 5 million people,” Peters said. “That’s something everybody doing last-mile stuff wants to see.” Lower tax environment The city of Santa Clarita, Peters noted, demands less financial obligations from companies than in Los Angeles County, where Valencia is situated, and less bureaucracy than in the city of Los Angeles. “It’s very accessible, very proactive and business friendly,” Peters said of Santa Clarita, where rents are inherently cheaper, and companies don’t have to worry about gross receipts or utility taxes. In Santa Clarita Valley, one gets “all the advantage of being close to that market” plus less congestion. “Labor has no problem doing that reverse commute,” Balestra added. Literally decades in the making, The Center at Needham Ranch originated in the late 1980s, at a time when the Internet and e-commerce didn’t exist. The plan for Needham Ranch was pushed through at a time when then-Gov. Arnold Schwarzenegger had made a huge effort to stem the flow of runaway production from Hollywood. Since the streaming wars ramped several years ago, “they’re doing a great job of bringing production back,” Peters said. For a time, the Great Recession stalled the Center’s prospects. However, development picked up speed four years ago after Trammell Crow and Clarion got involved, and the concept was revised to accommodate the current business landscape. Oltman’s Construction Co. has been working as the project’s general contractor; the architect is HPA Inc., while the civil engineer is Alliance Land Planning & Engineering. Peters deemed the Center “the most complicated I have seen” in his three decades working in real estate because of the amount of soil imported for the multi-building site’s construction and “bringing infrastructure to an area that has no infrastructure.” “What we’re building here,” Peters said, “nobody has this in the L.A. market.”

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