As Southern California's economy moves deeper into the expansion phase of its business cycle, Temecula is emerging as one of the most prosperous new communities in the region.
A variety of factors are behind this. Geography is playing a role as the city is receiving growth impulses both up Interstate 15 from San Diego County and down from Orange County.
Also, a mountain gap that allows ocean breezes to flow into the city provides a moderate climate by inland standards and has permitted the development of sophisticated wineries.
Attitude is important, as Temecula's leadership has always approached economic growth from a qualitative standpoint, providing the city with a disproportionate share of the Inland Empire's higher paying and high technology firms.
Environmental and residential factors have come into play as Temecula rests in a beautiful setting that is luring relatively young, well-educated families to upscale homes that are inexpensive by Southern California standards. The city's average income levels are thus higher than the surrounding region, the educational performance of its young people is above state averages, and it is one of Southern California's safest cities.
These statements flow from a review of hard demographic, economic and quality of life data about Temecula.
From 1990 to 2000, Temecula grew from 27,099 people to 53,791, a gain of 26,692 people or 98.5 percent, the second fastest among inland area cities with over 50,000 people behind Chino Hills. Temecula is succeeding partly because Southern California's coastal counties are running out of land and the city offers families the chance to acquire homes in a beautiful setting at reasonable prices. As a result, many professionals and younger families are migrating to it from San Diego and Orange counties.
Residential real estate a big draw
As Temecula enters the 21st century, it is poised to remain one of the fastest growing and most prosperous communities in the Inland Empire. From 1990 to 2000, the city's housing stock grew by 7,875 (up 73.9 percent with all but 716 of the city's new units being single family homes). In 1999 alone, 20.2 percent of the city's housing stock turned over, making it the most active market in the inland region. Looking at the city's home sales history, the existing market peaked at 774 units in 1989, before diving to just 446 in 1990 as Southern California's recession began.
Subsequently, sales accelerated to records of 1,432 units in 1998 and 1,505 in 1999. In the new home market, Temecula's sales also peaked in 1989 at 866 units before plunging to 250 in 1990-1991.
On a Southern California basis, Temecula's existing homes remain a bargain. The 1999 median price was $13,000 to $89,000 below Los Angeles County ($187,000), San Diego ($215,000), Ventura ($237,000) and Orange ($263,000) counties.
Temecula's new homes traded at a median price of $206,729 in fourth quarter 1999 and are nearing the 1990 record of $215,286. Since the 1993 low of $130,547, the city's prices have risen 58.4 percent. On a Southland basis, there is little wonder why the city is attracting new homebuyers.
In 1999, the apartment vacancy rate was an almost non-existent (1.8 percent with an average monthly rental rate of $750 in 1999). The average rent ranked fifth in the inland region behind four areas close to the Orange and Los Angeles county lines.
A center of job growth
Temecula's emergence as a center of job growth is primarily the result of the migration of firms and people to the Inland Empire from the Southland's coastal counties. This migration is occurring as the density of land development in San Diego, Orange, and Los Angeles counties has created a shortage of manufacturing and housing space, and increased space costs.
Temecula is unique in three ways. The major impetus for the growth is coming north out of San Diego County not from Orange or Los Angeles counties. Firms have leapfrogged many miles of undeveloped land to locate within its borders. The jobs coming to the city are better paying than the Inland Empire average.
The city's economy has begun to specialize. Retail trade added the most jobs (2,551) due to the city's expanding population base. Manufacturing ranked second, adding 2,449 positions. The hotel & amusement industry was third with 1,469 new jobs due to the Pechanga Entertainment Center, and tourist visits to the wineries, Old Town and annual events like the Temecula Valley Balloon and Wine Festival. By 1999, Temecula's largest sector was manufacturing with 5,863 jobs, followed by retail trade with 5,379.
Industrial real estate
From 1994 to March 2000, the real estate industry reports that Temecula's location advantages have caused at least 30 medium sized firms to move to, or expand within the city. Not counting secondary impacts, these companies have or will eventually add 2,487 jobs to the community's economic base. All but three of these firms are manufacturers. They make products such as medical devices, semi-conductors, and communications equipment.
Six of these 30 operations have migrated to Temecula from either Los Angeles, Orange or San Diego counties. The balance moved to the city from elsewhere in the Inland Empire, or were in Temecula and acquired new space for expansion. They are located in Temecula as the city has a beautiful location, affordable land, modern space, and a well-educated labor force willing to work for less to avoid long commutes.
The city also offers companies uncongested access to logistics centers such as the Ontario International Airport, Consolidated Freight's regional hub in Mira Loma, and BN-Santa Fe's Intermodal Rail Yard in San Bernardino. Importantly, the city is located on the I-15 corridor equidistant from San Diego and Orange counties.
In April 2000, Coldwell Banker estimated that Temecula had 7.8 million square feet of strictly manufacturing and distribution space, representing 3.3 percent of the Inland Empire's inventory. Within the inland region, it is the community making the transition from a small to a mid-sized market.
Temecula's inventory of industrial space rises to 9,904,065 square feet if multi-tenant sites are included in its total. The city's inventory has increased 58.4 percent from the 6.25 million square feet of industrial space that existed in 1990.
In April 2000, Temecula's industrial space vacancy rate was 10.8 percent. The highest rate was 21.5 percent in the 50,000 to 99,999 category, followed by 16.2 percent in the 5,000 to 14,999 group. The vacancy rate was in the mid-6 percent range for the highly sought after 100,000 plus group, as well as the 15,000 to 24,999 and multi-tenant categories.
The Inland Empire industrial real estate market, of which the city of Temecula is a part, is among the strongest in the United States. Industrial space absorption by manufacturers and distributors has soared since 1996. For the four quarters ended at 4th quarter 1999, gross absorption was 26.1 million feet, up from 18.0 million for the four quarters ended at 4th quarter 1998.
Temecula is a city that proves the axiom that quality of life is a key factor in luring high technology companies. Its beautiful location, thoughtful industrial marketing policies, and position on the I-15 freeway equidistant from San Diego and Orange counties, has allowed it to draw upscale manufacturing firms that might otherwise have located in coastal counties or in more intensely urbanized areas of the Inland Empire.
From 1990-1999, Coldwell Banker estimates that the city's total inventory of industrial space has climbed from 6.25 million to 9.9 million square feet. That represents a 58.4 percent increase. Of this space, the largest share was 3,652,727 square feet in the highly sought after 100,000 plus square foot category. In April 2000, 238,318 square feet of this space was available. This represented 24.3 percent of the available space and a vacancy rate of 6.5 percent.
The next largest share of inventory was among multi-tenant buildings. They included 2,063,658 square feet of space, with 132,791 vacant or a 6.4 percent vacancy rate. In the 50,000 to 99,999 foot category that is needed by a lot of medium size high technology and manufacturing firms, the city has 1,097,407 square feet of space. Of this 235,760 is available or a 21.5 percent vacancy rate.
From 1994 to March 2000, 30 firms have undertaken significant expansions in Temecula. Six have come from outside the Inland Empire. The other 24 have involved expansions within the city or companies moving from elsewhere inside the region. These firms are moving to Temecula because of its physical beauty and its location being equidistant between the San Diego and Orange County Markets along the I-15 freeway. Once in the city, they find an educated labor force willing to work for less to avoid commuting long distances. This fact represents a powerful potential market tool for the city.
These 30 firms accounted for 2,487 new jobs upon making their moves. Of these, 27 were manufacturers that added 2,375 jobs when their facilities opened. This is an average of 88 workers per firm. It is higher than the average of 72 workers for all new Inland Empire manufacturers. The city's manufacturers are relatively small users of space averaging 734 square feet per worker, compared to an Inland Empire average of 957.
(Ed. note: Theses excerpts are from a city of Temecula 2003 report on demographic, economic and quality of life data compiled by John Husing, Ph.D. It is reprinted here with permission from the city of Temecula.)
The full text of the Husing Report 2003 may be viewed online at www.cityoftemecula.org/cityhall/EconomicDev/HusingReport2003/intro.htm