SAN GABRIEL VALLEY—Industrial Market Hits Lull As New Projects Progress

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The hot industrial market in the San Gabriel Valley cooled off a bit in the third quarter, with vacancy rates and lease rates staying at mid-year levels despite a scarcity of new space.

However, with an influx of investment by high-tech and light-manufacturing businesses in the area, the submarket is expected to remain strong into 2001 and beyond, real estate sources said.

Only 3.6 percent or a little less than 5.5 million of the existing 150 million square feet of industrial space in the San Gabriel Valley was vacant at the end of the third quarter, according to Grubb & Ellis Co. That was unchanged from the vacancy level at end of the second quarter.

The monthly asking lease rate for industrial sites in the third quarter also remained constant from the second quarter, at 52 cents per square foot.

That amount is one cent above the Los Angeles County average and five cents more than the lease rate for the San Gabriel Valley in the year-earlier quarter.

“Things were kind of slow until Labor Day, but they’ve picked up since,” Grubb & Ellis Senior Vice President Jim Center said. “Demand is still good. If you are a buyer or a seller, it’s a really good market to be in.”

A little more than 1.3 million square feet of industrial space was sold or leased during the third quarter, down almost 1 million square feet from the same period in 1999.

But with competition among warehouse and manufacturing users expected to fuel a surge in demand, and available space in short supply, the market is likely to become tighter, Center said. Seeing particularly strong demand are properties in Irwindale and City of Industry.

In what is by far the largest ongoing project to address the shortage of industrial space in the San Gabriel Valley, Trammell Crow Co. is moving forward on its massive Irwindale Business Center.

After breaking ground on the first phase of the 2.5 million-square-foot development in the fourth quarter of 1999, Trammell Crow closed escrow Aug. 30 on an adjacent 63-acre property where the second phase is to be built. Trammell Crow officials said the purchase price of the former mining property was just under $9 million.

Trammell Crow Vice President Phil Lombardo said groundbreaking on some build-to-suit components of the second phase could begin by the end of the year or early in the first quarter of 2001.

When it’s complete in the latter part of 2002, phase two will add more than 1 million square feet of space to the San Gabriel Valley, most of it devoted to light industrial and office uses.

In the meantime, Trammell Crow officials said they plan to begin leasing the first five buildings in phase one a total of about 250,000 square feet in December.

Leasing activity at the project is being aided by developments at the nearby San Gabriel Valley Corporate Center, where Lucent Technologies is involved in the $70-million conversion of the former Home Savings headquarters to house a radically expanded Ortel the optical component company purchased by Lucent in April.

“We’re getting a lot of drafting off that type of use. There’s a need for high-end industrial use,” Lombardo said. “There’s been a lot of pent-up demand. There hasn’t been any other land in the area where you can build a large, first-class business park.”

Trammell Crow has been fielding inquiries about the Irwindale Business Center from businesses throughout the San Gabriel Valley, as well as from others in the South Bay and the San Fernando Valley.

Prospective companies are eager to save money on rent and establish themselves in an area where other high-tech companies are doing business, Lombardo said.

In addition to the high-tech sector and e-business companies, much of the demand for industrial space in the San Gabriel Valley in the fourth quarter and into 2001 is expected to come from warehousers and light-manufacturing businesses.

“You never know, but we’re very optimistic. It’s plausible we could have the whole first phase leased by this time next year,” Lombardo said of the Irwindale Business Center.

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