"Stockton, Calif., airport enjoys boom in industrial, construction activity"

Monday, November 15, 2004

Stockton, Calif., airport enjoys boom in industrial, construction activity
The Stockton (CA) Record


STOCKTON, Calif. -- It's easy to feel small in the booming industrial areas
around Stockton Metropolitan Airport.

Streets here may stretch out a half-mile or more between intersections, the
equivalent of six or seven downtown city blocks.

Cavernous distribution warehouses of a half-million square feet or more --
room enough to plop down 10 football fields -- are common. They dwarf
tractor-trailer rigs pulled into the loading bays, much like a supermarket
compared with a pickup.

Seven commercial-industrial projects covering roughly 2,300 acres are under
way in the immediate airport area. And there's more to come.

San Joaquin County officials hope to launch development next year of the
long-planned Stockton East project -- 550 acres of industrial, office and
retail uses between the airport and Highway 99 to the east. Beyond that,
city officials see future industrial growth pushing farther east and south,
toward the state's Northern California Women's prison and Burlington
Northern Santa Fe Railroad's Intermodal facility.

So far this year, new construction around the airport has doubled, said
Kevin Dal Porto, first vice president with CB Richard Ellis.

"Nearly 1.6 million square feet is currently under construction with roughly
75 percent of the total being built on speculation," he wrote in an e-mail
response. "This represents an estimated $80 million total investment cost."

Carolyn Johnson, chief financial officer of Eureka Fabrication Inc., has
witnessed much of the recent change.

"In six years, since we started the business, it's amazing what's come out
here," said Johnson, who with her husband, owns the business where more than
30 employees use precision lasers to cut parts out of sheet metal --
anything from paper-thin to 3/4-inch thick.

Some newcomers are Simpson Strong-Tie, a manufacturer of construction
connectors that occupies a 600,000-square-foot plant and distribution
center; Golden State Lumber, operating a 300,000-square-foot facility; and
BMW recently announced plans for a new 250,000-square-foot parts warehouse.

What's driving this growth is access to transportation -- the airport, Port
of Stockton, Interstate 5 and Highway 99, and BNSF rail yard -- and
relatively low costs.

"We really would have preferred to be close to where we live," said Angels
Camp resident Johnson.

But a building in the airport industrial area, with easy access to the Bay
Area and Central Valley, won out.

"We're pretty centrally located," Johnson said. "We're able to get stuff
moved in and out quickly. It's very convenient for our suppliers. ... We're
within an hour and a half of most of our customers.

Lower costs for land and operations were factors that prompted
Dorfman-Pacific, a national hat company, to move from Oakland 16 years ago,
initially occupying a 97,000-square-foot building with 38 employees,
officials said.

That national distribution center has since expanded to 275,000 square feet
and 169 employees, said Bakul Patel, Dorfman-Pacific controller.

"Plus there's room to grow here," Patel noted. "There's still space behind
us if we wanted to add to this building."

The great majority of the company's hats are manufactured overseas and
imported through the Port of Oakland, which handles seagoing shipping
containers. Stockton's own inland port specializes in bulk cargo, such as
cement, steel, sulfur, fertilizer, rice and cotton.

Several factors contribute to the boom in industrial and commercial activity
around Stockton, said Michael Locke, chief executive of the San Joaquin
Partnership, a nonprofit business development agency.

Demand has increased through the years as the U.S. economic recovery gains
speed. Industrial projects in Manteca and Tracy are running short of
available space.

As a result, "Stockton has captured a bigger percentage of the new project
development in the past two years," Locke said. That share amounts to
roughly 65 percent of all new local transactions.

Also, he said, "We still believe that work-force availability in Stockton,
transportation, access to rail and product movement through the port of
Stockton are all contributing factors to the successful siting of these
projects.

San Joaquin County officials hope to set the bar a little higher for future
airport-area developments with their 550-acre Airport East project, which
could potentially get under way by mid-2005.

In addition to the manufacturing and distribution activities that typify
current developments, Airport East is intended to include high-end office
space and retail uses, such as hotels and restaurants, on land near Highway
99 and Arch Road, said Barry Rondinella, airport director.

To make that happen, he said, "You start with a specific plan that designs
something that doesn't currently exist in this area in terms of its upscale
features: better architectural requirements, parks and bike trails ...
things like that."

Offices in the area aren't entirely new. The San Joaquin County Office of
Education has long been located off Arch-Airport Road, but it built those
facilities for its own use.

Buzz Oates Real Estate, the Sacramento-based firm that is the leading
developer in the airport area with control of about half of the existing
projects, is currently building a 108,000-square-foot office building just
off Highway 99 north of Arch-Airport Road. It is still seeking a tenant or
tenants. That makes it a pioneering project, said Bob Taylor, Oates regional
vice president.

"I think that people that are in the office-development market are probably
scratching their heads saying, 'What the heck are those people doing out
there?' " Taylor said. He explained, "We saw a tightening office market in
Stockton ... and we chose to think outside of the box a little bit."

The airport itself, too, is adjusting its focus. America West Airlines
terminated passenger service there in September 2003 after a 2 1/2-year
stint, and ongoing efforts to attract another carrier have come up empty.

But earlier this year, county officials completed a new $6 million air cargo
center, a 10-acre area east of the airport's main runway. It's intended to
attract more freight operations, leveraging the airport's long runway and
proximity to highway and rail transportation.

Rondinella is seeking a cargo-marketing consultant "whose role would be to
help us tell the world about our great facility, location, etc." Also, the
airport plans to expand an older cargo ramp adjacent to Farmington Fresh,
which provides cold storage and air-shipment services for fruits and
vegetables.

"The Asian economy is back, and we anticipate ... a lot of tree-fruit
shipments that will require cold storage," he said.

Locke agrees with the goals of building a new air-freight business base and
landing some research facilities and business offices. However, he thinks
the picture is incomplete.

"The key to a higher-value development in that region and the next phase of
expansion is construction of the Arch-Sperry connector to I-5," he said.

That estimated $110 million project would tie the west end of Sperry Road
into the existing French Camp Road interchange on Interstate 5. It's only a
half-mile stretch, but because of rail lines and French Camp Slough, traffic
from I-5 currently must go several miles out of the way to reach the
airport.

Taylor, while he supports both the air-cargo improvements and I-5 connector,
is not convinced they would have a dramatic impact on economic activity in
the area.

"I think it's too early to tell what kind of effect that's going to have,"
he said about the new cargo center. "I only really see maybe one or two
companies utilizing that facility."

As for a Sperry Road-I-5 connector, he said, "It would just relieve
congestion at the Arch Road-Highway 99 interchange."

Taylor has mentioned the Sperry Road connector to many business executives
considering locating in Stockton.

"To a person, they say, 'Yeah, that would be great.' But does it make a
difference to whether you're going to do business here? No, it doesn't," he
said.

It made a difference to at least one company, said Steve Carrigan,
Stockton's economic development director.

An executive from Ace Hardware, a national retail chain planning a new
distribution center near the airport asked, "How do I get to I-5?" Carrigan
said.

After hearing the answer, the executive opted to locate in Tracy, even
though real-estate costs were appreciably higher.

Carrigan and Taylor both said that restoring regular airline service to the
airport would make a bigger economic splash than new air-cargo operations.

"We have this wonderful asset that just about any city would love to have,
and it's just sputtering," Carrigan said.

County officials, too, would like to bring passenger service back to
Stockton. But it's a matter of being realistic, Rondinella said.

"We recognize that the airline industry is really struggling right now and
is in a contraction mode, not an expansion mode," he said. "Until they get
to the point where they are looking to gain market share rather than just
survive, it's going to be difficult to get them to take a risk in a new
market like San Joaquin County."

In any case, there's no denying the importance of the airport and
surrounding industrial lands.

"Collectively, if you look at all the industrial parks around the airport in
south Stockton, it is the largest industrial development area in the county
... and will provide the central focus for job development over the next
decade," Locke said.

And whether today's mix of giant distribution centers and smaller service
businesses gives way to forests of office complexes and research facilities
is anybody's guess.

"What's really going to make it interesting is 20 years from now, when we
look back and ask, 'Did we do it right?' "Carrigan said.


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