Office and industrial space in the South Bay is getting steadily scarcer as the Westside fills up and companies turn south in search of new digs.
Overall, the office vacancy rate declined to 12.6 percent in the second quarter, down from 15.3 percent in the first quarter, according to Grubb & Ellis Co.
The industrial vacancy rate also dipped slightly, to 3.77 percent, from 4.0 percent in the first quarter which means rentable industrial space is almost nonexistent.
"The overflow from the Westside is much like a tube of toothpaste being squeezed into the South Bay," said William S. Goodglick, president of the Goodglick Co. brokerage. "It is moving southward and following the spine of the 405 (San Diego) Freeway."
As an example of how quickly property is moving, Goodglick pointed out that his company two weeks ago listed a 61,000-square-foot office building at the corner of Aviation and El Segundo boulevards. Goodglick expects to have the building fully leased in three months. In slower times, the building would have taken six months to lease. "We're seeing a lot of dynamism in the market," Goodglick said.
For example, Digital Media Campus recently signed an eight-year, $12 million lease for 55,000 square feet at 2221 Park Place in El Segundo. The company is an incubator for sports- and entertainment-industry startups. Digital Media's investors include Los Angeles Lakers star Shaquille O'Neal, sports agent Leonard Armato and Oracle Corp. Chief Executive Larry Ellison.
Currently, the office vacancy rate in the El Segundo/Manhattan Beach submarket is 9.3 percent, down from 12 percent in the first quarter. With fewer vacancies, more office buildings are being constructed, particularly in El Segundo and along the 190th Street Corridor, said Kevin A. Shannon, a senior vice president at Grubb & Ellis.
Continental Development, one of the largest landlords in El Segundo with a 90-acre office complex, is constructing a 25,000-square-foot office building called Aviation Center at Rosecrans Avenue and Aviation Boulevard. It is slated to be up for lease early next year.
Even the perennially high office vacancy rate around Los Angeles International Airport is dropping. During the second quarter it hovered around 26 percent, down from 28.6 percent the previous quarter.
The LAX office market is made up of several buildings on Century and Sepulveda boulevards. They were built primarily in the 1970s and 1980s to serve the aerospace industry, which has waned in the last decade. Now these offices are in greater demand as rents climb in nearby areas.
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