Activity by Small Businesses Causes Drop in Vacancy Rate
By CONOR DOUGHERTY
Staff Reporter
Small deals and a diverse set of businesses are keeping the Mid-Cities industrial market alive.
The first quarter vacancy rate was 6.1 percent, compared with 6.4 percent in the fourth quarter of 2001 and 5.7 percent for the like period a year ago. At the same time, the asking rent in the submarket fell two cents from the previous quarter, to 48 cents a square foot, according to Grubb & Ellis Co.
“Both sales and leasing activity have been slow for the last six months, especially with the big buildings,” said Steve Calhoun, a senior vice president at Colliers Seeley International. “There is still a strong demand for small buildings.”
Calhoun, who defines “big” as buildings larger than 75,000 square feet, said large corporate tenants are sticking to tight budgets, reducing demand for large blocks of space that are typically located in the more modern, expensive buildings.
“I don’t think their business has returned enough to justify taking on additional space,” he said.
While no one deal took a substantial portion of space off the market last quarter, smaller deals have tended to buoy business in the area.
The quarter’s largest lease deal was a renewal for 79,000 square feet at 9142-9160 Norwalk Blvd. in Santa Fe Springs. The 18 month, $636,000 deal was signed by Parts Channels Inc. Another renewal was signed by Westmark Enterprises for 55,160 square feet at 13450 Imperial Highway in Santa Fe Springs. The $1.5 million deal was for another five years.
Chris Sheehan, an associate vice president at Colliers Seeley, said he saw more deals that closed in the first quarter than in the fourth. “It seems like the deal activity definitely increased,” he said. “That (fourth quarter) was just dead. In January and February the phones started ringing a little more.”
Down period
Sales also were slow for the quarter, but brokers in the field have said activity is beginning to pick up. Tuff Stuff Products bought a 26,000-square-foot building at 9520 Ceebee Drive in Downey from McGean-Rohco Inc. in a deal valued at $1.1 million.
“There is a lot more activity in the market and it’s been increasing into the second quarter,” said Sheehan, who brokered the deal.
The Mid-Cities’ most notable first quarter sale was 78,633 square feet at 12976 Sandoval St. in Santa Fe Springs. Talley Communications purchased the building from Western Federal Chemical for $5.1 million. Also, a 21,000-square-foot building at 13546 Imperial Highway in Santa Fe Springs was sold to PMW LLC for $1.3 million.
Looking to the future, brokers said prospective tenants are showing renewed interest, but not enough to get their checkbooks out. “We’re seeing signs of a comeback,” Calhoun said. “There are more inquiries and requests for tours, but they haven’t resulted in offers yet.”
While no new space entered the market in the first quarter, a few new properties are set for completion this spring, including a 219,000-square-foot building called the Golden Springs Business Center at 13409 Orden Drive in Santa Fe Springs. Another second quarter addition will be 180,000 square feet at 16501 Trojan Way in La Mirada.
No significant deals were closed during the first quarter in the Mid-Cities office market, which typically doesn’t have large office tenants to begin with. For the most part the area’s office market is limited to locally driven companies that conduct business within the neighboring industrial market in Los Angeles and Orange Counties. Much of the space is leased for sales, support and other back-office type activities.
So while activity has slowed (Calhoun said in the good times he was closing multiple 80,000 square feet to 100,000 square feet deals per quarter) the area’s diverse set of manufacturing and distribution companies have limited the Mid-Cities’ exposure to any particular industry.
