Industrial Strength

When Jesse Martin’s produce company needed room to grow, he could have found space in a safe and clean suburban industrial park.

But the 54-year-old Mexican immigrant wanted to stay in downtown Los Angeles, close to the produce markets where he began working on the loading docks four decades ago. So Martin is building a $4.5-million distribution center and warehouse amid the razor wire, antiquated buildings and homeless encampments of the downtown industrial zone.

“This area has been good to me and I don’t want to leave,” said Martin, president of Value Produce Inc.

In what many consider a hostile and depressing environment, the downtown industrial section has proven to be a fertile incubator for entrepreneurs like Martin.

Fueled by Southern California’s booming foreign trade and the continued strong performance of the apparel and produce industries, a range of toy importers, dressmakers and food wholesalers--many of them immigrant-owned and family-run affairs--have gobbled up nearly every bit of new industrial space in the southeast end of downtown and triggered a mini-building boom.

“Just when I thought I couldn’t build another 40,000-square-foot building, I build another 10,” said Ken Jackson of Dynamic Builders, which has completed more than 75 industrial structures in the area during the last five years.

Modern industrial space is in short supply. During the first quarter of the year, the downtown industrial and warehouse vacancy rate was about 6%, slightly below the countywide rate and down substantially from 10.2% for the same period last year, according to the real estate firm Grubb & Ellis. The vacancy rate for the downtown office market is almost three times as high.

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The appetite for space is expected to remain strong, leading a major real estate firm to break ground in June on a 20-acre downtown industrial park designed to appeal to entrepreneurs involved in foreign trade. In addition, the $1-billion Alameda Corridor Project, which will speed up truck and rail traffic between the ports and the downtown area, will boost the industrial zone’s historical role as a regional distribution center.

“Everybody focuses on the downtown office buildings,” said Jack Kyser of the Economic Development Corp. of Los Angeles County. “But if you go off to the east, there you will find a very vibrant and interesting economy.”

The downtown industrial zone is unique among major American cities. Many of the factories and warehouses in or near central New York and San Francisco, for example, have either been replaced with office buildings or converted into shopping and entertainment complexes.

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In Chicago, a wave of gentrification has led many of the remaining downtown area manufacturers and wholesalers to lobby the city for zoning laws to prevent their buildings from being converted into expensive residential lofts.

In contrast, an estimated 120,000 mostly blue-collar workers pour daily into the industrial area of downtown Los Angeles, which lies roughly between skid row on the west and the Los Angeles River on the east. As the white-collar section of downtown slumbers, a parade of trucks packed with fresh produce and other merchandise rumbles through the narrow industrial streets hours before dawn.

The area--about 200 city blocks--draws its strength from its proximity to low-wage labor, freeways and rail lines and the operation of the long-established wholesale markets that serve the produce, flower, seafood and fashion industries.

Like the craft guilds of some medieval city, the various industries--such as watch importers and flower vendors--tend to cluster in distinct neighborhoods squeezed into an area only about 1 1/2 miles wide. Fourth Street, for example, is the domain of toy importers. Frozen food warehouses and seafood dealers gravitate toward Seventh and Alameda streets.

Neal Engstrom, a project manager for the real estate firm Lowe Enterprises, recalls his failed effort to persuade a Korean garment company owner to locate east of Central Avenue in what has traditionally been the domain of produce companies. “For her, that was an insurmountable distance to move when in reality it was only half a mile away,” Engstrom said.

The industrial zone is made up mostly of aging brick warehouses and squat, no-nonsense cement-block structures where Chinese-made toys await distribution to Mexico and restaurateurs inspect crates of freshly picked California artichokes.

Many of the firms want to stick close to the giant wholesale markets, which attract buyers looking for goods to stock the shelves of national retail chains, regional supermarkets and mom-and-pop stores.

“It’s like a shopping center . . . and it’s the reason that a lot of industrial users want to be here,” said James Kinetz, an industrial broker for CB Commercial.

However, the small buildings and lots that make the area a perfect incubator for new and medium-sized businesses are a big drawback once the firms need larger and more efficient quarters. Few of the older buildings, for example, have the large loading docks and parking lots needed to handle modern trucks and trailers.

As a result, it’s not uncommon for companies to head for larger and often more affordable space in Vernon or the City of Commerce.

The lack of suitable new space had led many business owners and a few developers to construct new space that met modern-day industrial and warehouse standards.

Last month, Lowe Enterprises, which owns the historic Seventh Street Market, began construction on downtown’s newest industrial park, Alameda Trade Center, which has been designed for, and marketed to, the area’s immigrant business owners. Unlike most large corporations, they prefer to own, rather than lease, industrial space.

Three lots have already been sold, including one to a Korean-owned frozen seafood firm and a Chinese watch importer, said Douglas M. Hinchliff, a Lowe partner.

“Corporate America is not down here,” Hinchliff said. “It’s the immigrant entrepreneurs.”

It also takes ingenuity to build modern, efficient industrial buildings on downtown’s tiny turn-of-the century lots. One necktie manufacturer added a parking lot atop a 65,000-square-foot addition. Then, the new building and existing structures--which are separated by a large storage yard--had to be linked by a bridge to make it easier to move merchandise.

“You just can’t buy 10 acres. You have to get creative,” said Jackson, the sales manager of Dynamic Builders.

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Despite the demand for space, there has been concern that the area’s mainstay--the garment industry, which occupies about half of all available space--might shift more work to Mexico to take advantage of lower labor costs. In addition, the area’s large homeless population and crime remain chronic problems.

City officials and business leaders are studying the creation of a business improvement district, which would raise money from industrial zone property owners and tenants to pay for additional security and other services to help clean up the area. A similar arrangement in the 60-block garment district within the area last year helped reduce crime and blight, according to city and business officials.

The possible creation of a business improvement district is not enough to keep many frustrated business and property owners from moving out.

Jess Markey’s frustration with the area has led him to consider moving his commercial printing company, Markey Printing & Graphics, which was founded by his grandfather and has been downtown for more than 80 years.

“There are people hanging around your cars and hustling your customers,” said Markey, who has three buildings on Crocker Street for sale.

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Still, many longtime business owners and newcomers remain committed to the area. For example, a buyer has entered into escrow on the 20-acre former Rykoff-Sexton food distribution center on Alameda Street, according to people familiar with the deal. The investors plan to put a furniture factory on the site--where giant pea-green warehouses stretch across the block--and build about 300,000 square feet of space for produce industry tenants.

About three months ago, brothers Tommy Lisa, 71, and Peter, 68, voiced confidence in the area by moving their women’s and infant apparel manufacturer--Kathy of California Inc.--into a new 105,000-square-foot facility near the concrete banks of the Los Angeles River. The $8-million plant is across the street from where tractors are preparing a one-acre site for Martin’s Value Produce facility.

The Lisa brothers, sons of an Italian immigrant who arrived in Los Angeles in the 1920s, decided to construct a new distribution and headquarters building after failing to find a suitable existing facility. Moving the firm out of downtown Los Angeles, where it has been for 36 years, would have been too disruptive and made it too hard for many of their workers to remain with the firm, the brothers said.

“It was never a consideration,” said Tommy Lisa of leaving the area. “Our roots are here.”

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The Industrial Zone

Many immigrant entrepreneurs have set up shop in the industrial and warehouse zone of downtown Los Angeles, leading to a decline in the vacancy rate and a rise in construction in recent yea1920151050