MID-CITIES: Slow Economy Spurs Retailers to Shed Warehouse Space

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The vacancy rates were still falling in the second quarter in the Mid-Cities, but the fairy tale ended for the L.A. County industrial stronghold last quarter.

The region, which includes Downey, Norwalk and nearby cities, saw industrial vacancies rise dramatically to 2.5 percent almost twice that of the second quarter’s 1.3 percent.

Brokers said the market wasn’t able to hold out much longer as poor consumer spending forced retailers to scale back inventory. As a result, the demand for large chunks of warehouse space dropped.

“Furniture and flooring retailers are big space users, and they have been hit hard,” said Clyde Stauff, senior vice president, Colliers International Property Consultants. “We are also seeing the paper and box industry contract, and they are big space users.”

Three different businesses let go of warehouse space totaling about 573,000 square feet during the quarter, including furniture manufacturer Klaussner Home Furnishings, Stauff said.

The market also slowed as port-related logistics companies stopped looking to the Mid-Cities. In previous quarters, the region had been riding high from South Bay spillover. But that has ended as the port slowdown has driven up South Bay sublease space by 58 percent since last year.

“Distributors now have some alternatives close to the port that they didn’t have before,” Stauff said. “When they were looking a year ago they weren’t any vacancies in the South Bay.”

However, brokers said that the Mid-Cities market will not see a severe decline as companies continue to downsize and look for smaller warehouses, something the market aging stock has plenty of.

“The region is desirable because of the recent trend of logistics companies going from big box 400,000-square-foot facilities to smaller regional boxes,” said Greg Matters, vice president of industrial and logistics services at Jones Lang LaSalle Inc.


MAIN EVENTS

– Cenveo Inc., a Stamford, Conn.-based envelope, form and label manufacturer, leased back a 135,344-square-foot building at 13341 Cambridge St. in Santa Fe Springs. The deal, a seven-year lease, closed at $12 million.

– Canadian laundry, pharmaceutical and beauty care manufacturer KIK Custom Products leased back 183,000 square feet at 9082 Dice Road in Santa Fe Springs from New York-based investment firm Angelo Gordon & Co. for a reported $10.75 million.

– Processing and Distribution Services Inc. signed a 128,000-square-foot sublease at 13226 Alondra Blvd. in Cerritos. The manufacturing, importer and retailer logistics company subleased the space from Service Craft LLC for two years at $0.50 per square foot.

– Electrical product manufacturer Agents West Inc. renewed a 58,540-square-foot lease at 14701 Industry Circle in La Mirada. The 22-year-old company, which also has offices in Irvine, Pismo Beach and Las Vegas, has over 55,000 square feet of inventory, including electrical box covers, and lighting and power systems.

– WCP Champion Exposition Services signed a 76,224-square-foot lease at 14701 Industry Circle in La Mirada. Owned by WCP Exposition Services Holding Co. LLC, it is one of the largest event marketing and service providers in the U.S. and produces more than 1,500 events annually.


Industrial Market At a Glance

Inventory: 106 million square feet

Under Construction: 67,360 square feet

Asking Rents: 59 cents

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