Getting Under the Wing

The Kosmont survey finds that 120 of the 194 California cities it studies are "relatively economical" when it comes to doing business. "And by no means are these cities necessarily in remote areas," Kosmont says. "In fact, many of them are essentially indistinguishable from their expensive neighbors."
        Just north of the city, food service giant SYSCO Corp. is constructing a 300,000-sq.-ft. (27,870-sq.-m.) distribution center on 46 acres (18.6 hectares) in Oxnard. The operation will become SYSCO's twelfth "fold-out" company and its fifteenth distribution location in California.
        "We have publicly expressed our strategy to expand our presence in the Southern California market for some time," said Charles H. Cotros, SYSCO's chairman and CEO, in December 2002. The company's "fold-out" strategy – the opening of a new facility in an area with an established customer base of between $120 and $150 million that is being served from a distant SYSCO location – has continued to be a successful internal geographic growth strategy since its inception in fiscal 1995. Similar facilities were established in 2002 in Columbia, S.C., and Las Vegas, Nev.
        Another ring community is Santa Clarita, on the north end of Los Angeles County. "It is one of the cheapest cities in California to do business," Kosmont says. While the state's signature cities will still attract their fair share of locations because of that very signature status, says Kosmont, "many organizations can find cheaper yet very efficient locations under the wing of these high-cost centers."
        A community at the tip of that wing is Kern County, centered around Bakersfield. I.C.E.'s Moore says the climate is flat at best for projects, but that hasn't kept the firm from tallying a string of successes, like the 800,000-sq.-ft. (74,320-sq.-m.) add-on to the 1.2-million-sq.-ft. (111,480-sq.-m.) distribution operation for IKEA on the Tejon Ranch in Kern County. IKEA President Mike McDonald stated that the Tejon Ranch location was the most strategic location it could find in Western North America, both in terms of end markets and work force.
        That same equation continues to find its answer in Kern for Sears Logistics Services, which has expanded to well over 1 million sq. ft. (92,900 sq. m.). The Tejon Ranch industrial complex is master planned for 5 million sq. ft. (464,500 sq. m.) over 350 acres (142 hectares) in its first phase. The industrial market overview from Colliers International cites other large leases in Bakersfield by Harvel Plastics, Daisytek and Target, and projects an increase in spec industrial buildings in this area known for its low costs and low vacancy rate.
        One more positive attribute for Bakersfield: it is the least prone to traffic congestion of any California metro, according to the 2002 Urban Mobility Study. Moore says there is a "huge amount" of land being offered for industrial development in these outskirts.
        Kern County's economic development efforts are focused on attracting call centers, logistics and warehousing facilities and operations from the plastics sector, which already boasts a significant presence in the area in the form of companies like GAF Materials Corp., Domino Vinyl Plastics Manufacturing and KW Plastics. Among the corporate officials expressing satisfaction with the area is ChevronTexaco Exploration and Production Vice President Gary Luquette, who says it's not only the business-friendly environment, but "the fact that our 850 Kern County employees, from entry-level to executive, find it a good place to live." For Frito-Lay's distribution strategy, Kern was the crucial hub between the L.A. and San Francisco markets, as well as the point of embarkation for U.S. points east.