Momentum in North Los Angeles County’s industrial market kept pace in the first quarter, further pushing up rents and lowering vacancy rates.
Sales and leasing rose 61.2 percent, reaching nearly 3.1 million square feet from 1.9 million square feet at the end of last year, according to Grubb & Ellis Co.
The Santa Clarita Valley saw especially brisk industrial activity for the North County, which also includes the Conejo, Antelope and San Fernando valleys.
“All indicators seem positive at this point,” said Doug Sonderegger, senior vice president with CB Richard Ellis Inc. “About a year ago, people were buying because interest rates were low, but now also the underlying businesses have gotten healthier.”
Industrial vacancies dropped to 3.5 percent in the January-March period from 3.9 percent in the preceding three months and 4.7 percent a year ago. That nudged up asking rents by one penny, to 63 cents per square foot, surpassing the countywide asking rent of 53 cents for the quarter.
Because of the limited supply of large buildings in the San Fernando Valley, companies seeking space looked further north to the Santa Clarita Valley. “There were certainly several large buildings sold and leased during the first quarter, which is great for the marketplace,” said Jim Linn, a senior vice president at Grubb & Ellis.
Demand for industrial space also sent sales prices soaring. Sonderegger estimated that prices for properties in the 12,000 square-foot to 20,000 square-foot range went for about $120 per square foot, up at least 15 percent from last year.
“Both the sale and the lease markets are continuing to improve,” he said. “Leasing is starting to show more activity, and the sale market is continuing to be strong. Prices are continuing to escalate across the board.”
Among the bigger industrial deals in Santa Clarita, John Paul Mitchell Systems purchased a 171,000-square-foot building from Spirit Properties in the Centre Pointe Business Park. And Bel Air Lighting subleased 189,250 square feet from Pharmavite LLC at 28104 Witherspoon Parkway. Terms in both deals were not disclosed.
Meanwhile, in the tiny 1.6 million-square-foot Santa Clarita Valley office market, first-quarter vacancies rose to 7.2 percent from 6.6 percent over the previous quarter, and the asking rent for Class-A office space rose to $2.43 from $2.08 amid strong demand and low supply.
“The fundamentals remain strong,” said David Solomon, a first vice president with CB Richard Ellis. “Rental rates are continuing to firm up, concessions are less.”
Brokers anticipate construction activity picking up in the market, but significant amounts of office space aren’t expected to be available until next year.
Right now, a lack of large buildings concentrated activity in smaller deals. “Vacancy is getting to the point where tenants in excess of 10,000 square feet are going to have difficultly finding a decent number of alternatives,” Solomon said.
