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Dan Floriani co-founded Pacific Industrial three years ago. The Long Beach-based company just announced a major project in Fontana, and it’s looking to develop in other Inland Empire submarkets.
Dan Floriani would probably receive a good timing award, if there was such a thing for forming an industrial development company.
Floriani has helped develop and finance more than 10 million square feet of industrial real estate during his 18-year career in industrial real estate. He worked for several companies – DCT Industrial, Phelan Development and Panattoni Development Co. – before deciding to form his own business.
That happened three years ago, when the Southern California industrial market – and the Inland Empire market in particular – began to recover from the recession.
At the time, not many people were starting news businesses, but Floriani remembers sensing there was something about the industrial market circa 2012 that convinced him it was time to go out on his own.
“I’d been working in industrial for awhile, and the timing felt right so we decided to do it,” said Floriani, who started Pacific Industrial along with Neil Mishurda, who is now a partner.
Long Beach-based Pacific Industrial purchases and develops industrial properties throughout Southern California. Since its founding, the company has been involved in approximately $460 million worth of industrial transactions, either developed projects or purchases.
That’s a solid number for a company that started with six employees only three years ago. Now, Pacific Industrial is making its first major move into the Inland Empire.
Last month, the company announced that it had leased a 750,000-square-foot warehouse-distribution facility it developed in Fontana to LG Electronics USA.
LG Electronics manufactures and distributes household appliances, including flat screen television sets, microwave ovens and refrigerators.
The building, at 5565 Sierra Ave., cost $60 million to develop. Details of the lease were not released, although when the deal was announced an official with Pacific Industrial described it as “long-term.”
LG Electronics moved into its new facility, which consolidates all of its Inland operation under one roof, last month. Between 200 and 300 people are expected to work there.
By next January, Pacific Industrial will have finished a second 750,000-square-foot building next to the LG Electronics facility. The two-building project reportedly will be the second-largest development of its kind in Fontana.
Given the state of the Inland industrial sector, there’s not much risk in building another major industrial project on “spec,” Floriani said.
“There’s always a chance of the market turning, but right now the Inland industrial market is pretty strong,” Floriani said.
Floriani spoke with IE Business Daily this week on how the LG Electronics deal came about, what makes a good location for an industrial project and Pacific Industrial’s future plans in the two-county region.
Q: Is there anything wrong with the Inland industrial market? At the moment, it seems to be operating as well as it can, or very close to that.
A: I don’t think we’re doing enough to keep businesses in California. Too many of them are leaving. But you’re right, all of the Southern California industrial market is red hot right now. There was a report out recently that said the Inland Empire, Orange County and Los Angeles County are the three hottest industrial markets in the United States. All three are below five percent in vacancy right now. That’s pretty amazing.
Q: You said there was something in the market three years ago that made you want to start your own company. Can you be more specific?
A: It was a combination of things. By that time Neil and I were both old enough to do it, and that’s important because there are some age issues in the real estate business. Also, the market was starting to improve by then. It just felt like we had a great opportunity in front of us.
Q: How did the LG Electronics deal happen?
A: They approached us. Some other people were interested in it, and we got some other offers, but once we started talking with [LG] the negotiations went smoothly. We weren’t surprised when we signed one tenant, but we did design the building so that it could be subdivided, just in case.
Q: You seem to have much confidence in the local industrial market, at least in the short-term.
A: I do, but I never want to sound too confident, because markets can always turn around. I think the way you survive a slow market is to develop the best buildings you can.
Q: What do you look for when you’re buying industrial sites?
A: Good freeway access is probably the first thing. You want to be able to reach as many freeways as possible. Right now we prefer the 210 Freeway because it isn’t as congested. Interstate 10 has more traffic and it’s going through a lot of off-ramp improvements, which makes it worse. You also want flat sites, because you never want to have to do too much grading. It also helps to be close to the ports.
Q: Which of the Inland submarkets do you believe will remain hot, at least for awhile?
A: I think Fontana will remain a strong market. Looking ahead, I think there are a lot of industrial opportunities there. On the east end, I like Moreno Valley. What I really like is that there is an equal amount of absorption on the east and west sides.
Q: Do Riverside and San Bernardino counties really have an endless supply of developable industrial land, as some people seem to think?
A: No, I don’t think that’s accurate at all. On the west side especially the supply of land is finite. The price or land has been going up. That only happens if there’s a limited supply.
