Data Center Development in the San Gabriel Valley: What Puente Hills Mall Means for Industrial Real Estate

A New Chapter in Industrial Real Estate Trends

Anyone tracking industrial real estate trends over the past two years has watched the same story unfold in market after market: aging retail assets are being reimagined as data center campuses, and power infrastructure — not square footage — is becoming the deciding factor in valuation. The latest, and arguably most closely watched, example of this shift is unfolding in Southern California, where Puente Hills Mall in the City of Industry is being evaluated for conversion into a data center and battery storage site.

Why Data Center Development Is Reshaping the Industrial Real Estate Market

Data center development has become one of the fastest-growing segments within the industrial real estate market, and it follows a very different playbook than traditional warehouse development. Developers are now studying substation capacity and interconnection timelines before they even evaluate a parcel's zoning or layout. Land near existing utility infrastructure — even land never marketed as industrial — is being reconsidered through this new lens. A retail parcel with legacy power connections, like Puente Hills Mall, can suddenly become more attractive to data center developers than a "clean" site that lacks grid access.

From Retail to Infrastructure: The Puente Hills Mall Case

Once a thriving shopping destination in the San Gabriel Valley, Puente Hills Mall struggled for years against the same pressures affecting enclosed malls nationwide. As foot traffic declined and anchor tenants departed, the property became a likely candidate for repositioning. After the mall sold in 2024, discussions between the new ownership group and the City of Industry reportedly began evaluating the site for data center and battery storage use — a process that started before any public rezoning application was filed. In power-constrained submarkets, power negotiations are now often happening ahead of the traditional entitlement process, which changes how these deals need to be underwritten.

Renewable Energy and Solar-Powered Data Centers

One of the clearest patterns nationally is the rise of the renewable energy data center as the preferred development model. Solar-powered data centers, paired with battery storage, typically clear interconnection queues faster than traditional grid power or nuclear generation, shortening the gap between acquisition and stabilized income. They also support "bring your own power" strategies increasingly common where utility capacity is constrained. Because major cloud and AI operators have made large-scale renewable energy commitments, sites offering solar or hybrid power are simply more competitive when courting hyperscale tenants — making this a real leasing requirement, not just a marketing detail.

Entitlement Risk in the City of Industry

Community opposition organized quickly across the San Gabriel Valley, with residents calling for a full Environmental Impact Report under CEQA, raising fire-safety concerns tied to lithium battery storage, and questioning a governance structure in which the City of Industry's council is elected by a very small resident population despite decisions affecting far larger neighboring communities. For anyone evaluating similar conversions, entitlement risk deserves the same rigor as construction cost or lease-up assumptions — delays here can materially change deal timelines and returns.

What This Means for Commercial Real Estate Trends

The Puente Hills Mall situation is a useful preview of broader commercial real estate trends likely to play out across Southern California. Underperforming retail near industrially zoned land is increasingly being repriced as infrastructure land. Power capacity is becoming a standard due-diligence item for industrial spaces for lease, alongside traditional site metrics. Entitlement timelines need real contingency built in, particularly for projects requiring rezoning from retail to industrial use. And developers who can offer renewable or co-located power are positioned to compete more effectively for hyperscale tenants.

Whether or not the Puente Hills Mall project ultimately moves forward as proposed, it's already a useful case study in how AI-driven demand for data centers is colliding with legacy retail assets, local governance, and community expectations — and how power infrastructure, not just location, is becoming the defining factor in where the next wave of value gets created across the San Gabriel Valley.