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From Hill Country to Industrial Hub

The 1,450-acre Tejon Industrial Center is perhaps the most visible evidence that rural Kern County, Calif., is fast becoming a national distribution hub. Those ambitions might seem surprising to some drivers zipping along Interstate 5, who think of Tejon Ranch as a patch of rolling hills and scruffy prairie 30 miles south of Bakersfield and 60 miles north of Los Angeles. Highway access and low-cost real estate, however, are chasing the cattle off the vast grazing lands of Tejon Ranch.

Amassing 270,000 acres, Tejon Ranch claims to be the largest contiguous privately owned piece of land in California. By far the biggest industrial tenant at the ranch is Swedish furniture retailer IKEA, with 1.7 million sq. ft. of high-tech warehouses in two sprawling buildings — the second of which was completed in 2003. Combined, the two industrial facilities represent the retailer's Western U.S. distribution hub.

IKEA is not alone in the region. Sears, Target and Wal-Mart all have put up facilities of 1 million sq. ft. or larger in the past five years in Kern County. Tejon Industrial Center has received an entitlement for 20 million sq. ft. of construction.

Why is Kern County in such demand among industrial tenants? Tejon Industrial Center is the latest outpost of development for the “L.A. megapolis,” says John De Grinis, a senior vice president with Colliers Seeley.

More importantly, Tejon Ranch is one of the most strategic distribution points in California. The property is located at the junction of Interstate 5, the major north-south trucking route for the West Coast, and Highway 99, the major route through Central California. Nearby Highway 58 feeds into Interstate 40, a major east-west corridor.

What's more, changing logistics in the trucking industry are helping to transform Tejon Ranch into a major distribution hub, according to Barry Hibbard, vice president of industrial and commercial marketing for Tejon Ranch Co. Recent changes in federal trucking laws, he points out, limit drivers to 11 hours on the road per day. A rig that starts out from Tejon Ranch in the morning can complete a round-trip to the Bay Area in that amount of time.

In addition, the area boasts an abundant labor force: Kern County grew 40% from 1990 to 2000. And in a farm economy where unemployment can spike to 18%, people want to work. According to Hibbard, every job opening at IKEA had 13 applicants. “The new three L's for real estate,” says Hibbard, “are labor, logistics and location.”

That's not to say the slow economy has left Kern County untouched. DaisyTek, a distributor of computer peripherals that leased half of a 650,000 sq. ft. building two years ago, has since vacated the building.

One new strategy at Tejon Ranch is to pursue smaller owner-occupant deals. Forty miles south, in the affluent suburb of Santa Clarita, build-to-suits can cost as much as $80 per sq. ft. for buildings smaller than 50,000 sq. ft. At Tejon Ranch, the same projects could be built in the mid- $40s per sq. ft.

To pursue the owner-occupied market, Tejon Ranch in October signed an agreement with Catellus Development Corp. of San Francisco to help bring new build-to-suit deals to the business park.

But the big push remains the national retailer seeking space for consolidated warehousing, says Hibbard. “We're reaching out to any major retailer that needs a presence on the West Coast.”

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