f you believe everything you hear, there's a wave of companies leaving California. But in the best surfing tradition, many companies are finding ways to gouge that wave, as even a challenging business climate is no match for the advantages that the region confers.
        As a hub for connection to Asia and as a giant economy all its own, Southern California generates its own momentum. Even with the gradual decline in manufacturing, the 1.8 million people employed in manufacturing in the state led the nation by a large margin in 2001, according to the U.S. Census, earning some US$75 billion.
        Steve Cochrane, an economist at Economy.com who studies the region closely, says, "All of Southern California has really worked as a bit of a ballast for the Western economy as a whole." He gives the defense industry most of the credit for that, girded by a strong presence in the San Diego area, and in pockets like El Segundo in L.A.
        Such a stalwart presence is a godsend for a state government with empty pockets. The California Technology, Trade and Commerce Agency has sacrificed more than half its staff of 200 to the Gov. Gray Davis budget-cutting ax, which is aiming to take out around 1,500 state jobs overall. In the eyes of many, much of the work accomplished by the Council on California Competitiveness a decade ago has been undone. Government-caused or not, the ubiquitous deficits on all levels may cause some pain for corporations. But legislation hasn't helped. One bill has doubled workers compensation costs for some businesses. Another requires prevailing wages to be paid on any private project receiving state assistance.
        "If you interpret it strictly, if you said you got any incentive at all from a community, you would become viewed legally as a public project," says Jim Renzas, president of Location Management Services, based in Mission Viejo. "And when you become legally viewed as a public project, you become subject to prevailing wage ordinances, which is essentially union wages. Construction costs would go up 30 percent for some companies."
        The most recent blow was the 2001 suspension of the net operating loss deduction for two years. Some may see these developments as groundbreaking. Others say they do nothing to encourage either groundbreaking or development.
        Yet one reason they keep coming is that the California quality of life persists. Besides the touted scenery and mild temperatures, community safety is prevalent in California. The 9th Annual Safest City rankings by Morgan Quitno Press found that 14 of the 50 safest cities in the nation were in the Golden State.
        That ranking is countered by housing affordability numbers, with only 29 percent of households able to afford a median-priced home in January 2003. But affordable areas do exist, and they often co-exist with a business-friendly environment.

In L.A., Ports Are the Real Stars

Economy.com's Cochrane says the Los Angeles economy is traditionally driven by its demand for consumer goods, supporting a huge complex of operations for managing their distribution and marketing. Although it hasn't reclaimed the peak of activity it last saw in the early 1990s, he characterizes the L.A. economy as "very stable."
        The 2003 Kosmont-Rose Cost of Doing Business Survey, an annual survey of local taxation burdens on business, found a different, less palatable stability – for the ninth consecutive year, Los Angeles earned the "high-cost" rating. The list of costs ranges from a gross receipts-based business license tax to a traffic impact/trip fee.
        But the great thing about studies is there is always evidence to refute them. In the case of L.A., that factor can be found at the ocean's edge, where the combined ports of Los Angeles and Long Beach saw around 10 million ship containers pass through in 2002.
        The recently released Cushman & Wakefield real estate capital markets report for the region predicts that the capital that poured into investment properties in 2002 shows no signs of waning in 2003. One place that capital is surely pouring is into Trammell Crow's $300-million Century City office complex, recently approved by city planners and scheduled for an April city council vote.
        Toward Long Beach, Kings Hawaiian Bread is putting in a 100,000-sq.-ft. (9,290-sq.-m.) bakery and manufacturing building in Torrance.
        "It's a unique project, with a large amount of cold storage and freezer storage," says Bob Moore, president of Anaheim-based I.C.E. Builders, which serves customers in the industrial, pharmaceutical, aerospace, chemical and food processing industries.
        Watt Commercial Properties has commenced construction on the $12-million, 180,000-sq.-ft. (16,722-sq.-m.) first phase of the 22-acre (9-hectare) master-planned California State University Long Beach Technology Park. Situated in a state enterprise zone on former Navy property, the center will eventually offer more than 375,000 sq. ft. (34,838 sq. m.) of industrial and office space.
        One newly formed company, WB Investment Co. (named for veteran co-founders Dave Wald and John J. Balestra) is seeking to acquire industrial, office and retail properties in the South Bay area in order to reposition them in the marketplace.
        Such re-purposing is a fitting description for a $70-million data center developed in the South Bay community of El Segundo. Originally completed in 2000 by telecom firm Abovenet, that concern subsequently relinquished it in August 2002 to longtime West Coast REIT Kilroy Realty. The 131,000-sq.-ft. (12,170-sq.-m.) facility has now been reborn as the Kilroy Data Center (KDC), intended for use by companies looking for a secure place to outsource data operations for disaster recovery or other critical IT functions.
        The area is already known for its security-minded corporate citizens, among them Honeywell, Boeing, Northrop and Raytheon. And they're all a few blocks from LAX airport. KDC's niche seems to fit right into an area that may be a natural offshoot of the defense presence in the region, which has already sprouted its own sub-cluster of technology companies oriented toward the entertainment world. The next phase might be the spreading operations related to the Homeland Security Act.
        Continuing around the L.A. periphery, Stowe-Passco Development is beginning work on an $18-million, 22-building industrial development in Rancho Cucamonga, aiming to complete each of the single-user facilities by 2005.
        Larry Kosmont says the cities in surrounding L.A. County and beyond – with telltale names like Industry and Commerce – offer distinct advantages.
        "Corporate investment is paying attention to a number of different kinds of transportation and mobility features," says Kosmont of the region, noting investments along the new 20-mile-long (32-km.) rail development known as the Alameda Corridor, and at San Bernardino airport. "The Alameda corridor has started to change the perspective of corporate America on where they ought to be located, and intensified interest around the port," he says. The mid-corridor trench portion of the project, completed in the spring of 2002, launched a new path for international rail cargo that now bypasses some 200 rail crossings.
        "It seems distribution is still an area where businesses can improve their bottom line," observes Wendell Clark, director of business development for Diffenbaugh Construction, a general contractor based in Riverside since the 1950s. "With the base closures in Riverside and San Bernardino County, there is a competition going on between Norton, March and George Air Force bases to develop intermodal distribution centers. I think warehouse/distribution and light manufacturing is going to be big because of these new intermodal facilities."
        To illustrate that trend, Diffenbaugh just completed work on a new 660,000-sq.-ft. (61,314-sq.-m.) distribution center for Kohl's on land formerly belonging to the Norton facility, but now controlled by Texas-based developer Hillwood and named Alliance, Calif. The George base has been renamed the Southern California Logistics Airport, which recently welcomed an engine testing hangar facility from General Electric.