With the vacancy rate for class-A office space in El Segundo dipping to as little as 5 percent last year, it’s not surprising that owners and developers went to work constructing new buildings and rehabbing older ones.
“Things that make the time right are the rapid absorption of office space in El Segundo in the past two years, and the Westside getting so difficult, expensive and tight, especially for large blocks of space. So places like El Segundo become more attractive,” said Brian Metcalfe of Cushman & Wakefield.
Two ground-up projects were recently completed: Continental Grand Plaza II is 60 percent leased, and a 60,000-square-foot office building at Raleigh Studios Manhattan Beach opened earlier this year.
Now, three rehab projects are underway to transform old office or industrial buildings into class-A space. “None were class-A and now they’re being modified to capture some of that demand,” said Grafton Tanquary of CB Richard Ellis.
The project nearest completion is 898 Sepulveda Blvd., where Legacy Partners has almost completed a major rehab.
Then there’s Rubin Pachulski Dew Properties, which recently bought a 50,000-square-foot industrial building for $5 million. The company plans to convert the 1960s building at 2221 Park Place to new office space geared to media, high-tech and entertainment companies.
“The buyer will make it an exclusive office environment,” said Metcalfe, who represented the seller with Cushman & Wakefield’s Don Ferris. “We’ve had interest by Internet-related companies, advertising and professional services firms.”
Proficiency Capital Corp. is also pursuing a major rehab at the southeast corner of Imperial Highway and Douglas Street.
“It’s a market area that seems to be more popular from the standpoint of Westside overflow. More tech companies are (looking) in El Segundo, and more are locating there as their market of choice,” said Jeffrey Trenton, president of Proficiency.
The 157,000-square-foot, seven-story building was built in 1963 and originally served as headquarters for North American Aviation. But it has stood vacant since 1991, when it was sold to a trust.
“Structurally, it was built like a battleship during the height of the Cold War for a defense contractor,” Trenton said, adding that the building was “a wreck” when Proficiency bought it last April,
By the time the work is done, the building will have new systems, interiors, exteriors and fa & #231;ade. (Proficiency recently obtained $19 million in construction financing arranged by Dwyer-Curlett & Co. through Guaranty Federal Bank).
“It will be a brand new building,” Trenton said. “It won’t even be close. People will be favorably impressed.”
As new construction projects come online, El Segundo’s vacancy rate has edged up to 15 percent overall, but Tanquary expects it to drop to 10-12 percent, even with the rehabs now underway.
“It should be a solid year,” said Tanquary, who is helping to market Proficiency’s building. “It’ll be interesting to see who captures the market and who misses the mark.”
Bids for DWP properties
The L.A. Department of Water and Power has received about $7 million worth of offers on the first 17 surplus properties it has put up for sale.
“On some of the properties, the response was overwhelming. And on some, it was not as much as we had thought. But on all, there was some level of interest,” said Blake Mirkin of CB, which is marketing the properties for the DWP.
Asking prices for those first parcels ranged from $32,000 for a 20,000-square-foot vacant lot in Victorville, to $3.5 million for 10 acres of coastal real estate in Seal Beach. On properties where there were multiple, close bids, the top two or three prospective buyers will have to submit a final offer.
Potential buyers “range from well-known development companies to people who live next door to the property for sale,” said Frank Salas, executive assistant to the DWP’s general manager.
Final sales must be approved by the department board and the City Council, probably in the next 60 days.
The department plans to stage several more rounds of property sales during the next few years in hopes of raising up to $125 million to reduce debt and generate revenue. Three office buildings are expected to go on the market next year.
Port development
Gardena-based Overton Moore & Associates plans to break ground in December on the 1.8 million-square-foot San Pedro Business Center, which could be the largest current speculative industrial development in the city of L.A.
“The market is directly connected to international trade at the port,” said Stanley Moore, president of the company.
With trade booming, the industrial market is super tight in the South Bay, where the vacancy rate is only about 4 percent.
The $80 million project will be located near the Harbor (110) Freeway and will cover the range of concrete, tilt-up industrial space, said Ken Carey, a broker at CB Richard Ellis who represented all parties in the deal, along with CB’s Tres Reid.
The site was formerly filled with oil tanks but has been cleaned up, Carey said. “It was a heavy industrial use for years, and developers cleaned it up and are making it a modern (development),” Carey said.
Overton Moore’s partner in the project is Pacific Coast Capital Partners in El Segundo.
News & notes
Maguire Partners has put MGM Plaza up for sale. It’s being marketed by Secured Capital and Cushman & Wakefield. The price per square foot is said to be in the $350 range for the million-square-foot building
Wildwood School has signed a 10-year lease valued at $11 million for an industrial building at 11881 Olympic Blvd. in L.A. Plans call for converting the building, which has been used for production offices, to an upper-grade school (the campus with lower grades will remain on Washington Boulevard in Culver City). Matt Ceragioli with Capital Commercial Real Estate represented the school, and John Bertram and Lloyd Bakan of Westmac Commercial Brokerage Co. represented the landlord
Elizabeth Hayes can be reached at (323) 549-5225, ext. 229, or at [email protected].
