Expanding Horizons, International Trade Fueling San Gabriel Valley’s Economic Future
By Kevin Smith Staff Writer© Pasadena Star-News/The Summitt, March 30, 2007
Every region’s economy is unique. Some are powered by technology or tourism, while others draw their strength from a variety of industries.
The San Gabriel Valley’s economy is diverse, with financial services, construction, leisure/hospitality and retail emerging as the fastest growing employment sectors.
And an increasing focus on international trade has infused the region with a more global economy, helping to offset heavy employment losses in manufacturing.
Manufacturing still ranks among the region’s top five employment generators, but figures from the state Employment Development Department reveal the Valley lost 19,537 manufacturing jobs – or more than 20 percent of that sector’s employment base – between 2001 and 2005.
“We’ve looked at manufacturing over the long haul and we’ve seen extraordinary impacts by offshore production or outsourcing of product lines,” said Vance Baugham, director of business assistance for the San Gabriel Valley Economic Partnership. “But we’re seeing a tremendous improvement in the industrial sector. The industrial vacancy rate in San Gabriel Valley is about 1 percent.”
That sounds good. But it also means businesses have nearly run out of space.
“If they want to grow it’s difficult,” Baugham said. “Lease and buy rates have gone up, so companies are either forgoing growth or moving out of the region where they can get the space.”
“Others have opted to remain, although they’ve split their operations,” Baugham said.
The San Gabriel Valley’s growth in import/export trade would appear inevitable.
The region is wired into this growth as a result of its burgeoning Asain population and the Union Pacific rail lines that bisect the region – lines that carry a staggering amount of goods to and from the ports of Los Angeles and Long Beach.
International trade has emerged as Southern California’s second largest industry behind tourism. In L.A. County, it tops the list.
“Through the first 11 months of 2006, the total value of two-way trade through the
Los Angeles Customs District was $302 billion,” said Jack Kyser, senior vice president and chief economist for the Los Angeles County Economic Development Corp.
“Imports accounted for $219 billion, or 75 percent of that, and $83 billion of it was exports.”
Last year, 15.76 million freight containers moved through the ports. But by 2015, that number is expected to increase to 26.1 million containers a year, according to Kyser.
“A lot of people are stunned by these numbers and wonder how we’ll handle it,” he said. “Within five year’s time we’ll see those ports operating 24/7 out of necessity. We don’t have that much land, and when you start to run out…you have to operate more efficiently.”
“Industry, Hacienda Heights, Roland Heights, Diamond Bar, and Walnut are all located along the rail lines. As a result, businesses in those cities have forged strong trade relations with Asia,” said Don Sachs, executive director of the Industry Manufactures Council.
“We have over 2,300 businesses in Industry and 900 of those are either Chinese owned or operated,” Sachs said. “That number continues to grow. Five to 10 years from now…probably 50 percent of our business will be involved with China.”
“The flow of merchandise is heavy on wood products – primarily furniture – as well as tools, toys, and electronics, such as computers and computer components,” he said.
IMC Machines, Inc. in Industry imports and distributes precision vertical machining centers from Taiwan. The computer-controlled units are large, weighing 20,000 to 50,000 pounds each.
“They’re used to produce molds for making plastic products or parts for the aerospace industry,” company Vice President Wayne Tseng explained. “We do about 12 to 15 machines a year.”
The machines are produced by a Taiwanese company called AGMA, one of the most respected machine tool builders in Taiwan.
Tseng said his business lost some momentum because of a slowdown in the manufacturing industry, although things appear to be improving.
“This year and last year we’ve seen a little bit of a comeback, but in general the manufacturing sector has been on the decline,” he said.
Hisense USA Corp. imports its own brand of flat-panel TV’s, which are made in China and sold to retailers in the U.S.
The company maintains its headquarters and a 50,000-square-foot warehouse in Industry.
Logistics Manager Ivan Fang said sales are strong, although the competition can be fierce.
“Right now everyone wants to change to flat-panel TV’s,” he said. “They don’t want the traditional big box anymore. They want to hang it on the wall.”
Sachs said Asian-owned businesses in Industry are also importing lots of tools.
“They’re brining in every kind of tool you’d find in a Home Depot or Lowe’s,” he said. “They’re made in China and they’re made to meet all the requirements here in terms of quality. Probably 90 percent of the tools you buy in Home Depot are coming from the Pacific Rim.”
The Valley’s strongest employment growth during the 2001-2005 period was in financial services, which increased 29.1 percent to 44,272 jobs, according to EDD figures. Much of the region’s financial power emanates from Pasadena, home to East West Bank, IndyMac Bank and Wescom Credit Union.
IndyMac Bank is the second largest independent mortgage lender in the nation. For fiscal 2006, the bank generated $1.3 billion in revenue – a 22 percent increase over the previous year.
“There’s been a shift in the housing market from a market that was super heated to one that is relatively flat,” IndyMac President Richard H. Wohl said. “It’s not dramatically up or dramatically down. We see that trend continuing through the rest of this year at least.”
Wohl said he’s seen an increase in loan defaults, although it hasn’t been dramatic.
“We’re seeing an uptick in delinquencies, but it’s relatively small in the range that we expected,” he said. “The people who came into the market most recently and have overextended themselves will be the most stressed. But we don’t see the economy falling off a cliff anytime soon.”
Construction was the Valley’s second fastest growing employment sector, increasing 14.5 perfect to 31,878 jobs.
The leisure/hospitality industry ranked third, rising 14.1 percent to 59,608 jobs.
Retail trade was fourth, growing 13.3 percent to 75,923 jobs, and wholesale trade saw a 9.2 percent jump, topping out at 39,683 jobs.
Sachs said much of the region’s construction activity has been fueled by the warehouse and logistics facilities that have been built to handle the increasing flow of international freight in and out of Industry.
“It’s all been a positive influence,” he said. “In 1991 and 1992 we started to have a lot of vacant buildings in Industry because manufacturing companies were going elsewhere. It was the Chinese who came in and converted many of these buildings for warehousing and distribution.”
The SGV’s top five employment sectors in terms of sheer numbers are education and health services (92,605 jobs), professional and business services (89,165 jobs), retail trade (75,923 jobs), manufacturing (74,696 jobs) and public administration (68,541 jobs).
Gary Kaplan, president of Gary Kaplan & Associates, an executive search firm based in Pasadena, said the health care industry will definitely experience an increasing demand for employees.
“In the broad sense, I’m talking about pharmaceutical companies, biotech companies and health care delivery, including hospitals,” he said. “All of these things are applicable to an aging population of baby boomers.”
Kaplan expects the overall employment picture in the San Gabriel Valley to improve at a healthy pace, barring major economic upheaval or a global crisis.
But he warned that companies need to begin recruiting new employees now to meet the growing demand.
“There is a big deficit between the aging baby boomer generation that’s rapidly approaching retirement and the next generation,” he said. “I’ve heard all kinds of numbers bandied about, but some recent figures say that two workers are leaving the U.S. workforce for every one that is entering it.”
An economically healthy region can be gauged in part by the development that occurs within its boundaries. And there are plenty of new projects that are either planned or already under way in the San Gabriel Valley.
Most of the grading work has been completed for Rosedale, a 518-acre master-planned community in Azusa.
Currently the largest urban infill master-planned community development in Los Angeles County, the project will include 1,250 homes, a new K-8 school, 10 neighborhood and community parks, a $2 million recreation center, a vast arroyo with native plant life and walking trails.
William D. Holman, vice president of planning and community development for PLC Land Co., a managing partner of Azusa Land Partners LLC, which is developing Rosedale, said the project includes $81 million in infrastructure improvements.
“We’ve completed 90 percent of the grading and we’re in the process of getting major streets paved,” Holman said.
An April 14 grand opening is planned for five model complexes in Rosedale.
Across the Valley, the J.H. Snyder Co. plans to build a mixed-use residential condominium and commercial complex on property currently occupied by the Alhambra Place Shopping Center.
The six-story development would include 100,500 square feet of retail space, 244 condo units and a three-level parking structure.
In West Covina, a 315-acre development is under way that will bring recreation and commercial retail business to the city’s core.
The ambitious West Covina Commercial Center/Sportsplex will include a 43-acre commercial portion with more than 330,000 square feet of retail space, anchored by Target and Home Depot.
The project’s 27-acre Big League Dreams Sports Park will feature six replica baseball/softball fields, including smaller versions of Yankee Stadium, Wrigley Field and Dodger Stadium. The sports area will also have two restaurants, a 20,000-square foot multipurpose pavilion and batting cages.
The development – built at the site of a former BKK landfill – will be rounded out by an 18-hole championship golf course, a corporate center, and a preserved natural habitat area.
“We began construction in 2005 and we’ve already sold 43 acres for commercial use and 5.8 acres for office development,” said West Covina City Manager Andrew G. Pasmant. “The commercial center is expected to be completed later this year.”
The project will create 1,700 full-time jobs and provide West Covina with $4 million in annual revenue, Pasmant said, adding that the yearly economic ripple effect – including increased business at local hotels and restaurants – will be closer to $74 million.
Other area projects include Grand Crossing, a 400-acre mixed-use industrial center in Industry that will include more than 6.4 million square feet at build-out; El Monte Transit Village, a mixed-use, transit-oriented development; and The Shops at Santa Anita, an Arcadia development that’s designed to create a town center in the heart of the city.
The Shops at Santa Anita is planned by developer Rick Caruso, president and CEO of Caruso Affiliated.
Located on 85 acres adjacent to the Westfield Santa Anita mall, the outdoor “life-style center” would include 800,000 square feet of retail space with anchor stores, restaurants, smaller shops and a cinema complex; 27 acres of open space with a large 3.5-acre water feature; a 400-seat performing arts theatre and a 22,000-square foot administration building for the Arcadia Unified School District.
Caruso plans to build the administration building free of charge and lease it to the district rent-free for 40 years.
“At Caruso Affiliated, we’re about building places of community,” said Rick Lemmo, the company’s vice president of community relations. “We build places where people want to hang out.”
The Sydney, Australia-based Westfield Group, which owns and operates Westfield Santa Anita, has opposed the project, saying it would over saturate the area with too much retail in one location.
However, Westfield plans a Promenade expansion at its Arcadia location, which would add 115,000 square feet of open-air retail space and a covered parking structure.
Kent Valley, senior vice president of Majestic Realty Co., which is developing the Grand Crossing project, said he’s impressed by the caliber of development that’s occurring in the area.
“It’s been terrific to see the growth of the San Gabriel Valley,” he said. “I’m very proud of all of the things I’ve seen.”
