regg Fresonke has seen firsthand the difference that a San Bernardino County location can have on a Southern California-based business.
"After almost two years, our decision to relocate from Los Angeles to Rancho Cucamonga is reinforced every day," says Fresonke, vice president of marketing and sales for Hollywood Ribbon Industries, the largest manufacturer of decorative ribbons and bows in the Western U.S. "Everything has been positive. The move has helped our employees a great deal. The work environment here is much nicer, and our employees are very proud to work here."
Hollywood Ribbon moved from Los Angeles to its new manufacturing and distribution plant in Rancho Cucamonga on Dec. 6, 2010. The company signed a 10-year lease on the 135,000-sq.-ft. facility on Rochester Avenue with Dedeaux Properties.
The decision to leave the firm's home of 30 years was motivated by several factors, says Fresonke. Chief among them was San Bernardino County's willingness to roll out the red carpet.
"We found that the local government here welcomed us to the community," Fresonke says. "In Los Angeles, it was tough to run a business due to their restrictive laws and regulations. We found San Bernardino County to be extremely business friendly."
That pro-business climate has spilled over into many industries, resulting in San Bernardino ushering in a wave of manufacturing and logistics projects in recent months.
From small aerospace firms like Parrten Products to large manufacturers like California Steel Industries, the county, located east of Los Angeles, is proving to be the location of choice for high-growth companies seeking a better home.
In the case of Hollywood Ribbon, the opportunity to lower their operating costs and move into a neighborhood that was more conducive to their business was too good to pass up. Fresonke says, "We saw a lot of benefits in lower costs, less traffic, less crime and a better educated work force when we decided to move here."
Fresonke also likes his new plant's close proximity to the I-10 and I-15 freeways, as well as a triple net lease "that is saving the company tens of thousands of dollars every month on overhead."
The move paved the way for Hollywood Ribbon to achieve record-breaking sales in 2011, "and 2012 is turning out to be an even better year," Fresonke says. "This building is much better suited for what we do. We have 14 loading docks and easy access for truck trailers to get in and out of our location. In L.A., the streets were smaller and it was very difficult to handle large tractor-trailers."
Access to customers makes a big difference too, notes Fresonke. "Most of our largest customers — Wal-Mart, Dollar Tree, Family Dollar and Big Lots — have big distribution centers within about five miles of here. That makes it very easy for them to pick up goods here."
Ontario International Airport also "makes it very easy for customers to come visit us at our plant," Fresonke says. "It is convenient for customers to fly in and come here to do factory tours."
Hollywood Ribbon employs 55 workers now, but that count will grow throughout the fall to help fulfill seasonal orders, notes Fresonke. "We are hiring right now because we do a lot of shipping between August 1 and November 30."
Proximity to the Mexican border is a plus as well, he adds. "We own two maquiladoras where we do a lot of labor-intensive packaging just outside of Tijuana," Fresonke says. "They are about three hours south of us. We have two trucks a day coming back here with finished goods."
'My Employees Don't Leave'
Parrten Products Inc., based in Yucca Valley, is another business that is flourishing in the High Desert region of San Bernardino County. Family owned since 1972, Parrten specializes in manufacturing for the defense and aerospace industries.
"My business is able to thrive here because my employees don't leave," says Howard Parrett, president of Parrten Products. "They like the area and they love the housing costs and the clean air and the less traffic. And I have no trouble getting qualified people to work here. The county has come a long way in helping schools train skilled machinists."
Parrten makes products used in cruise missile defense systems, ejector seats on fighter planes, and escape slides for Airbus. Parrten, which employs about 30 people, has also made parts used in satellites and the lunar landing module.
"The aerospace industry is embedded in the Orange County and Los Angeles County areas," notes Parrett. "One of our biggest advantages is that we are serviced by UPS and FedEx. I don't need walk-in traffic. All of my business comes from customers spread out throughout the Western U.S. I don't depend on my local town for work, but it is definitely an advantage to be located in this region of the country."
Parrten's main customers are based in places like Irvine and Hollister, Calif., and Phoenix and Chandler, Ariz. "We are centrally located in the Southwest region to serve this industry," Parrett adds. "All of the major support services, such as heat treatment and electrical discharge machining services, are located in Southern California. That makes it very conducive to having your business here."
Parrett notes that because "the space program and the defense industry have been here for so long, everything is on a very fast time frame. This is a very good shipping hub, and people have built up the support industries here. The engineering talent is here. These items cannot be manufactured by unskilled labor."
He points to other positive location factors such as the weather. "It is absolutely beautiful here all year round," he says. "You get the best of everything but not too much of anything. It even snows here, but never too much. The housing costs are also very reasonable. A big plus is that we are so centrally located to all of the things that this region has to offer. We are three hours away from the Colorado River, 90 minutes from the mountains, 30 minutes from Palm Springs, and two hours from the beaches. This is a fantastic place to live."
Parrett also credits the county with helping Parrten become even more competitive. "I can't say enough about the county and how they have helped us grow our business," he says. "For first-time employees, they help defer the costs for the first 90 days of training. The county has put us in touch with great trade schools that have placed several great employees with our firm. And they are constantly calling us to ask if there is anything they can do to help us."
Parrett adds that "I am very proud of what we do. We make parts that save people's lives and protect this country. I have great employees. They are very dedicated, loyal and hard-working, and they come primarily from San Bernardino County. Our work force is the biggest factor in our success."
Amazon, CSI Take Up Big Plants
Heavy manufacturing is growing in the county as well. California Steel Industries — the largest producer of steel products in the Western U.S. — announced July 30 that it will invest $100 million into a new pipe mill on the company's site near Fontana.
The new mill will produce high-strength, electrical-resistance-welded pipe up to 24 inches in diameter and up to 80 feet in length. Annual production capacity is expected to be about 400,000 net tons, bringing CSI's total tubular product capacity to more than 600,000 tons. The company also makes hot-rolled, cold-rolled and galvanized sheet products, with a total rolling capacity of nearly 3 million tons.
"This will be the largest single capital investment in CSI history, and we have invested about a billion dollars since the company was formed in 1983," said Vicente Wright, president and CEO of CSI. "This is a testimony to the company's continued resilience in the tough economic times we are in, and is a tribute to CSI's shareholders and our employees, customers and suppliers."
Installation of the new mill equipment is slated for completion by the end of 2014. At capacity, the new pipe mill's additional tonnage is expected to generate about 100 total production and logistics jobs, bringing CSI's work force to nearly 1,100.
CSI is not the only big facility project coming to San Bernardino County. At AllianceCalifornia, a 2,000-acre, mixed-use development in the city of San Bernardino, Amazon.com recently announced that it will place a fulfillment center in a 950,000-sq.-ft. building this fall.
Alliance is a development of Hillwood Properties, a Dallas-based company owned by Ross Perot Jr. John Magness, senior vice president for Hillwood and leader of Hillwood's Inland Empire office, said that Alliance properties now cover 10 million sq. ft. and feature industrial space tenants such as Kohl's, Mattel, Pep Boys, Stater Brothers Markets, Medline, Kohler Faucets, Cott Beverages and others.
Hillwood and real estate management firm Clarion Partners participated in the deal with Amazon, which expects to create more than 1,000 full-time jobs with benefits in San Bernardino when the facility begins shipping to customers.
"We appreciate Hillwood and Clarion's ongoing work and thank Gov. Jerry Brown and state and local officials for their support," said Dave Clark, vice president of global customer fulfillment for Amazon.
Magness notes that Amazon is but the latest in a wave of projects for Alliance. "We have another 480,000 square feet under construction for another tenant, and we signed a lease with Cott Beverages for a new 350,000-square-foot facility," he says. "This has been a very good year for us."
Magness says that Alliance draws large industrial space users due to a combination of factors. "First and foremost is the park's proximity to Interstate 10 — the backbone from the Ports of Los Angeles and Long Beach to the rest of the country," he says. "This project is 55 miles from the port and is close enough that trucks can make two runs a day. The second factor is access to the BNSF Railway intermodal facility, which is about a mile from our closest building. Stuff comes out of the intermodal terminal and then on to the rest of the country."
Magness also cites "a very aggressive City of San Bernardino in terms of fast-track permitting and other assistance. Fourth is the quantity and quality of the work force in this 250,000-resident city, located in an Inland Empire region of 4.5 million people and within the Southern California region of 23 million people. And last are the tax incentives, Foreign Trade Zone and Enterprise Zone. Those are the cherry on the ice cream. Those factors put us over the top and help us win deals."
Location means everything for tenants, says Magness. "You cannot ignore the 23 million people in Southern California and not have a distribution center here," he notes. "That is why this county is in such a great location. We are the hub of I-10, I-15, I-210 and other major highways. That is why Kohl's chose to locate its distribution center here. They feed their stores all along the West Coast and in Phoenix from this location."
Costs play a huge role as well. "These are fairly large buildings on 40 to 50 acres. You cannot find sites that large west of the Inland Empire," says Magness. "Your rent and CAM and other costs are going to be less here than in other parts of Southern California. The labor is cheaper here, and so is the cost of living."
Magness adds that Alliance faced "very intense competition" for the Amazon project. "We already had a building ready to go that was permitted and entitled," he says. "That proved to be a big factor in enabling us to land this deal."
The demand for big buildings in the area is not going to subside anytime soon, he says. "Hofer Ranch is one of our projects. We have three buildings there just south of and adjacent to the Ontario International Airport," says Magness. "We have another building starting there in October. We have built around 1 million square feet in Ontario so far and have another 1.5 million square feet under construction there.
"We believe in the Inland Empire," he adds. "We understand it. We know why it is a good location. No one has moved out of our properties in 10 years. This has been a very good market for us."
Transit Projects Fuel Optimism
It has also been a good market for transportation improvement projects. According to Dr. Raymond Wolfe, executive director of San Bernardino Associated Governments (SANBAG), his agency will spend $734 million this year upgrading roads, highways, bridges and mass-transit rail service in the county. All of these projects are funded through a locally imposed half-cent sales tax.
"Providing access to developing lands throughout the county is part of our mission," says Wolfe. "The majority of the freight traffic coming from the Ports of Los Angeles and Long Beach moves up the I-15 Freeway in San Bernardino County. I-15 and I-215 come together at one of the most significant grades in the country. We are revamping that junction. That has been one of our big focuses."
The Devore Junction overhaul is a $324-million project that will benefit the movement of goods and commuters through the county, notes Wolfe. "We have a lot of distribution centers scattered around the Ontario Airport," he says. "A big part of our program is designed to improve interchanges and provide money to local communities to enhance the movement of goods."
Other significant projects include the $700-million widening and realignment of I-215 through downtown San Bernardino; a $178-million project to add a carpool lane to I-215; and a $130-million project to add nine miles of new rail line from San Bernardino to Redlands and five new passenger stations.
"We are looking at a number of rail extension projects," Wolfe says. "We are looking at the viability of extending the metro link in the county. Our overall investment into transportation improvements shows our commitment to creating additional options for transportation and improving conditions for commuters and freight movers."
Wolfe says it is important for SANBAG to "create a county that is business-friendly. Transportation is always one of the basic hurdles for business, and our countywide vision statement focuses on improving our competitiveness and our quality of life."
Wolfe says the potential for San Bernardino County is enormous. "We are the largest county in land area in the contiguous 48 states, and with a median age of 31, we are a lot younger than our neighboring counties," he says. "There are lots of opportunities that are yet to be realized. For example, Molycorp is a leading rare earths and rare metals company with a world-class rare earth resource in the County at Mountain Pass. These rare earth minerals will enable the U.S. to compete with China in several key sectors."
Business leaders like Fresonke and Parrett share Wolfe's optimism.
"A lot of companies outside of this area are unaware of the quality of life in the Inland Empire," says Fresonke. "There are a lot of towns nearby with average income levels well above that of Los Angeles. The standard of living is well above most areas of L.A., and it costs significantly less. You can save a lot on your overhead by moving to available buildings here, and the cost of housing is much more attractive to employees than what they find in L.A. or Orange County. You can find great values here."
Parrett calls his home county an undiscovered gem. "I wish more people and businesses would realize what a fantastic place this is," he says. "There are good people who live here and love to work. We have been here for 40 years. With the dedicated employees that I have and the growth of the region, I can foresee this company being here another 40 years."
This Investment Profile was prepared under the auspices of the San Bernardino County Economic Development Agency. For more information, contact Mary Jane Olhasso at 909-387-9801 or by email at firstname.lastname@example.org. On the Web, go to www.sbcountyadvantage.com.