Net Grocer Webvan Coming to Southland

Webvan Group Inc., one of the nation’s largest online grocers, is expected to strike a deal next week to open its first warehouse in Southern California, marking its entry into the region’s competitive and potentially lucrative market.

The Foster City, Calif., company has agreed to a $37-million lease in Foothill Ranch in south Orange County for a 340,000-square-foot warehouse, according to Lin Stinson, a broker who represents Webvan and property owner Sares-Regis Group in Irvine.

“We’ve come to terms on the lease,” said Stinson, a broker for Providence Realty Group in Laguna Niguel.

He said he expects an agreement to be signed as early as Monday. Construction on the facility is expected to begin this spring, he said, and should be completed in time for Webvan to start delivering groceries to homes by early next year.

Webvan spokeswoman Amy Nobile said the company has no comment on the expected deal “at this time.”

Webvan would join HomeGrocer.com, Pink Dot Inc., Kozmo.com and smaller Internet players such as Whyrunout.com in Aliso Viejo in an electronic commerce market that has been slow so far to attract a large number of consumers.

Online shoppers nationwide are expected to buy an estimated $350 million in groceries and related items this year, but that’s a sliver of a $450-billion industry in which most shoppers still go to supermarkets, not to their computers.

But by 2007, the online figure should rise to as much as $85 billion, according to a study last year by Andersen Consulting.

Competition is fierce. Shoppers Express, a national service that operated in Los Angeles, recently folded.

Others, such as Peapod, the nation’s largest online grocer, said serving Los Angeles is part of their long-range plans.

Since going public in November, Webvan has been growing rapidly. The company is spending $1 billion to build highly automated warehouses, signing leases recently to build distribution centers near Chicago, Washington, Dallas, Seattle and more than 20 other markets across the country.

Webvan, which delivers fresh food, other grocery items and nonprescription drugs, raised $375 million through its initial public offering. The company is chaired by Louis Borders, who co-founded the Borders Books & Music chain, and its chief executive is George Shaheen, who was head of Andersen Consulting.

But the company’s stock price has slid more than 50% from its peak.

Webvan reported a loss of $25.7 million, or 8 cents per share, excluding noncash compensation and related expenses in its latest quarterly report.

Webvan’s warehouse would represent the largest lease ever signed in Foothill Ranch, said Dougall Agan, a partner at Foothill Ranch Co., the firm that developed the 2,700-acre community.

About 100 companies are situated there, including the corporate offices of sunglasses maker Oakley Inc. Agan said his company has been pursuing e-commerce companies.

Webvan’s stock rose 19 cents to close at $12.06 on Nasdaq on Friday.