Low Interest Rates Spurring A Frenzy for Industrial Sites

Mid-Cities

By SAMANTHA LEE

Staff Reporter

Low interest rates and uncertainty in the stock market helped create a flurry of interest in the purchase of industrial property in the Mid-Cities area during the second quarter, but leasing remained lethargic.

Brokers said investors are looking at real estate as a safer alternative to leaving their money in stocks. “A good indicator is how much your phone is ringing,” said Chris Sheehan, an associate vice president with Colliers Seeley International. “And calls have increased over the second quarter,” he said.

Paul Sablock, a senior vice president at Colliers Seeley who specializes in industrial properties, added that “anything for sale with a decent price” is seeing considerable activity.

One of the largest sales was Layton Belling & Associates’ purchase of the 10-building Town Center Business Park at 10100-10450 Pioneer Blvd. in Santa Fe Springs from Town Center Business Associates for $433.5 million.

Another second quarter sale was Fantis Foods’ purchase of 15,530 square feet at 13505 Marquardt Avenue in Santa Fe Springs for $1.9 million from JMWM Limited Partnership.

“Low rates are creating a bubble throughout the L.A. basin,” said Tim Cronin, senior vice president at Lee & Associates.

While the demand for sales is up, the lease market remains as slow as it has been for the last six months, said Cronin, whose largest second quarter deal was Coaster Company of America’s sublease of 150,000 square feet from Invacare Corp at the Golden Springs Development in Santa Fe Springs for $2.5 million.

Year to date, leasing and sales activity is up to 2.9 million square feet from 2,7 million the same period last year.

“The majority of Mid-Cities properties are institutionally owned, causing more leasing than sales transactions,” Sheehan said.

According to Grubb & Ellis Co., the vacancy rate in the Mid-Cities for the second quarter was 6.3 percent, up from 6.1 percent for the first quarter and down from 7.6 for the same period a year ago. The asking rent in the submarket was up two cents, to 50 cents per square foot.

Slow lease activity has caused building owners to create incentives to lure tenants. Discounted rates and even trips to Hawaii or San Diego are being offered. “They are trying to put a little sizzle on the property to make it look different,” said Sablock. “Smarter, savvy owners do it first and end up making deals, while slower owners jump on the bandwagon.” he said.

Other major leasing deals included Archive America’s 3-year deal for 23,214 square feet at Mission Business Center in Santa Fe Springs for $11.9 million.

Smaller-sized businesses continue to keep the Mid-Cities market alive. “Demand for space below 30,000 square feet will remain stable,” said Sam Chu, a senior associate at CB Richard Ellis. “But prospects for larger buildings will continue to be limited,” he said. Several larger leases are under negotiations and will increase activity in the second half of the year, brokers said.

Afraid to commit

One second-quarter deal involved General Grinding Co., which leased 25,000 square feet from Maple Brothers Industrial at 15100 Valley View in La Mirada. Valued at $1.5 million, the lease spans 12 years. “Most companies would hesitate to be so committed,” said Chu.

Mega Creations leased 15,000 square feet with an option to lease 30,000 more at 10823 Shoemaker Ave. in Santa Fe Springs for 47 cents a square foot.

TNT Foods leased 10,000 square feet of space at 19260 Sunnyside Place in Santa Fe Springs from Pasadena Winter Gardens. The company is paying 56 cents per square foot for five years.

Lin’s International leased 27,800 square feet from TA Associates at Cerritos Industrial Park at 16704 Marquardt Avenue in Cerritos for 42 cents per square foot for three years.

“With the unsteady economy, most tenants are trying to make do with the space they have, Sheehan said. “There are a lot of renewal deals.”

Mid-Cities

Major Events:

– Layton Belling & Associates purchased the 10-building Town Center Business Park in Santa Fe Springs for $433.5 million.

– Fantis Foods purchased 15,530 square feet at 13505 Marquardt Ave. in Santa Fe Springs for $1.89 million from JMWM Limited Partnership.

– In a three-year deal, Archive America leased 23,214 square feet at Mission Business Center in Santa Fe Springs for $11.9 million.

– General Grinding Co. signed a 12-year lease for 25,000 square feet from Maple Brothers Industrial at 15,000 Valley View in La Mirada for $1.5 million.