Dearth of Industrial Space Fuels Rental Rates, Development Plans

0

High demand for industrial property in the San Gabriel Valley continued in the fourth quarter, pushing the vacancy rate down and rental rates up. Lack of available space for purchase also fueled more speculative development in 2013, with 560,000 square feet under construction in the submarket by the fourth quarter, according to data provided by Jones Lang LaSalle Inc.

Rental rates are rising in tandem with the tightening of the market: Average fourth quarter asking rent was up 2 cents from the third quarter. Year to year, the rate was up 5 cents to 47 cents in the quarter.

The increase came as the region’s occupancy rate – already quite high – tightened even further. The vacancy rate dropped a full point in the fourth quarter to 4.4 percent, making the San Gabriel Valley submarket the tightest industrial area in Los Angeles County outside of Central Los Angeles.

Last year, 9.9 million square feet of industrial space was sold or leased in the submarket, a decline of about a half-million feet from a year earlier. The reduction in activity represents scarcity rather than lack of interest, said Stuart C. Milligan, a senior director at Cushman & Wakefield Inc.

There is greater interest in purchasing property than there is leasing, he said, especially among the largely Asian import and logistics companies clustered in the valley.

“A lot of users are on the sidelines, with deals agreed to as far as purchase price and terms. They’re just waiting for various developers to actually acquire the land,” Milligan said.

Those presold deals take some of the risk off the table for developers, which is likely to drive additional development in the region.

“Developers will be delivering more for-sale projects because there is more demand than there is supply,” said Tony T. Phu, executive vice president at Colliers International. “The projects will be everything from 5,000 square feet to 100,000-plus.”

The tightening in San Gabriel Valley is also pushing more users east to the Inland Empire, which is experiencing its own industrial market boom, with increased speculative development and falling vacancy rates.

One solution to the logjam is in the works, resulting from the dissolution of redevelopment agencies across the state. A long-range property management plan to deal with former RDA land and leases has been prepared by the City of Industry and is awaiting approval in Sacramento. If approved, that action will free up multiple parcels for development in the city, said Reginald Bottger, Industry property manager.

A total of 72 properties were owned by the city’s redevelopment agency, including about a dozen prime industrial sites, Bottger said.

Many are small remnant sites or rights-of-way parcels that are likely undevelopable, but the larger parcels “should probably sell quickly once the state approves the plan. We’ll probably list 14 or 15 sites for sale right away,” he said, adding that there has been considerable interest in sites as large as 30 acres.

– Karen E. Klein

Main Event

  • A 100,000-square-foot warehouse building at 18901 Railroad St., City of Industry, was sold for $9.8 million, or $98 per square foot, to Twin Tiger Footwear. The seller was ProLogis.

  • Alcoa Global sold a light industrial parcel at 13001 Temple Ave. in the City of Industry in mid-December for $2.88 million, or $46 per square foot, to Golden Triangle LLC. The site houses a 61,000-square-foot building constructed in 1957.

  • DND Fashion, a shoe designer, importer and retail distribution business behind the Anna shoe brand, leased a 46,000-square-foot headquarters and distribution facility from Yum Yum Donuts at 17355 Railroad St. in the City of Industry.

  • Graybar City of Industry, one of 240 North American locations for the electrical and communications distribution firm, renewed the lease on its 157,000-square-foot building at 383 S. Cheryl Lane.

San Gabriel Valley

Industrial Market At a Glance

Inventory 126 million square feet

Under Construction 558,602 square feet

Industrial Asking Rents 47 cents

No posts to display