Location, Location, Location

EBMG Special Contribution

On June 11, 2013, a room full of manufacturers gathered at Quick Mount PV in Walnut Creek to explore the issues, trends and drivers of  the East Bay industrial real estate market at “Location Location Location.” The panel featured Claudia Wentworth, President & Co-Founder, Quick Mount PV; Alex Greenwood, Economic Development Manager, City Of Brentwood; Barbara Morrison, CEO & President, TMC Financing; and Ed Del Beccaro, Managing Partner, Transwestern.

Del Beccaro served as moderator and helped to set up the conversation. He suggested that the idea that manufacturing is dead in the U.S. and the East Bay is, quite simply, a myth. We’re blessed with both intellectual capital and an entrepreneurial spirit that’s hard to keep down. He noted that while suburban office space is at 15% vacancy, manufacturing space is actually at a 12% vacancy rate. From 2009 through 2013 there has been a steady increase in food processing (up 8.5%) and 25 major food processing plants are located in the East Bay. The City of Brentwood, serves as a distribution center for the Central Valley.

Del Becarro further acknowledged several other drivers contributing to the successful positioning of the East Bay. The Port of Oakland is on the verge of undertaking new expansion efforts to develop a 300 million square food warehouse capacity with rail service to the docks. In addition, they are developing capabilities for shipping parts to better serve Just In Time manufacturing needs. The East Bay is the center for many hot industries, including clean tech and solar. In addition, the influence of educational institutions on research drives jobs for the some 250 labs that call the East Bay home.

As a manufacturing company that has grown significantly the past few years, Quick Mount PV (which manufactures building-code-compliant, waterproof mounts used to secure solar electric and solar thermal systems to rooftops) has lived the start-up cliché – founded in a garage in Emeryville. Later the company moved into a 5,000 square foot facility in Concord and recently moved into its new 133,600 square-foot facility in Walnut Creek. Wentworth described the company’s strategy as it considered how to address its evolving facility requirements. Prior growth had happened in fits and starts with the company annexing space piecemeal as it’s needs grew. The company realized that it needed new space and did an analysis of the options, weighing the pros and cons of leasing versus owning their own space. In the end, they decided to purchase. They knew that location would be a critical element to their future success. Of course, the new location would need to satisfy a number of important basic requirements, such as adequate space, appropriate zoning and use allowances. Additionally, the company wanted to ensure that the location supported the quality of life that that they wanted to help create for employees. The proximity to resources such as restaurants, preschools and doctor offices all factored into the company’s ultimate decision.

Morrison, who founded TMC more than 30 years ago, has worked with thousands of companies.  Specializing in Small Business Administration financing, she commented that many companies are referred to her through bankers and real estate brokers, especially when companies are ready for expansion. Many manufacturers aren’t even aware of the options open to them until a trust professional refers them to a company like TMC.  In choosing location and deciding whether to rent or own, there are several aspects to consider.  Each option has its own set of pros and cons related to tax advantage, growth flexibility, term commitments, equity benefits and income potential. Morrison predicted that in the East Bay property will likely continue to appreciate in value, making ownership an attractive option for many companies that do not realize they qualify for financing programs such as SBA 504, which is available to smaller- and larger-sized companies. In addition to financing the purchase of a building, this type of financing can also be applied to build-out and construction costs.  The program pairs a traditional bank loan with an SBA loan to total a 90% loan at a blended effective interest rate that is lower than a bank loan alone. As a Certified Development Company (CDC), TMC works as a sponsor for loan applications with banks and the SBA. TMC then services the loan, monitors payments and serves as a collection agent.

Having watched the East Bay market for a long time, Morrison sees a “straight up” increase of manufacturing company activity each year since 2007, with only a slight dip in 2012. She dispelled the myth that the SBA loan approval process takes a long time, stating that the typical timing is three to four days.

Bringing the public entity perspective to the conversation, Greenwood explained many of the programs and resource that Brentwood, as a representative example of cities throughout the Bay Area, can bring to the table when a manufacturer considers where to locate its next facility. He commented that the East Bay has an amazing logistical infrastructure that should be very attractive to manufacturing clients. There are numerous government resources that can help to connect manufacturers with providers, services and business partners including groups like iGATE, the East Bay Economic Development Alliance, Manex and others.

Wentworth went on to share some of the unexpected hurdles QuickMount faced as they planned for their relocation to Walnut Creek. Along the way, they faced zoning issues at their preferred location. She cited the SBA 504 loan as an “amazing addition” for QuickMount, allowing them to keep critical cash flow during a time of rapid grow and a need for immediate hiring while developing the new facility. Other key strategies included smart supply chain management, negotiating with local companies  to save shipping cost and develop rolling long term contracts. She also discussed the challenges of running two facilities during the move transition period and effective inventory control as they continued to fill orders during the move – not missing a single shipment.

How are cities adjusting to new clean manufacturing as a part of our economy?  Greenwood acknowledged that the zoning in Brentwood’s general plan predates the current technological realities. He continued, saying the city is in the process of updating its general plan and will be retooling many of its policies along the way.  There is an effort underway to make the permit process easier and the city is putting serious dollars behind efforts to move office and industrial companies into the city.  Greenwood suggested that most cities in the region have taken a new outlook to economic issues. He commented that there is less competition between cities and more cooperation to create infrastructure that benefits growth for the entire region.

For manufacturers contemplating a new facility, whether in their current location or another, the panel recommended reaching out to the economic development managers in the cities they are contemplating. These folks can often help you navigate a number of programs, governmental departments and issues, including regulatory and permitting agencies, tax incentives and cash deals. While the end of redevelopment agencies in California has made money more scarce, there are still many opportunities available to a manufacturing company that finds the next perfect location for its business success.