San Gabriel Valley/23″/dt1st/mark2nd
By EDVARD PETTERSSON
Staff Reporter
The third quarter saw the continuation of a familiar story in the San Gabriel Valley, with developers scrambling to get new space on the market as vacancy rates tighten especially in the City of Industry.
The industrial vacancy rate declined to 5.2 percent for the July-September period from 5.5 percent in the second quarter, according to Cushman & Wakefield Inc. Brokers say the valley’s industrial market is even tighter than the numbers indicate because the available space is not the type desired by most tenants.
“The 5 percent vacancy rate represents antiquated, unusual space, while factual vacancy is zero,” said Keith Ross, senior vice president at Koll Development Co., referring specifically to the City of Industry.
The low vacancy rate and the continuing high demand for first-generation space have sent prices up 10 percent to 20 percent from a year ago, according Jim Center, senior vice president of Grubb & Ellis Co. In addition, the scarcity of land for new development means that prices at 48 cents per square foot, already among the highest in the county won’t be coming down any time soon.
The hottest industrial real estate market in the San Gabriel Valley is the City of Industry. A Grubb & Ellis report shows that 1.8 million square feet of industrial space was sold or leased there during the third quarter, out of a total of 2.5 million square feet sold or leased in the entire San Gabriel Valley.
The high level of activity is largely the result of new industrial facilities being developed by Koll and Trammell Crow Co.
Six weeks into construction, 75 percent of the first phase of Koll’s Plantation Business Center, a $70 million, 1.4 million-square-foot speculative industrial park, has been pre-leased or sold, according to Ross, and 50 percent of Phase II which won’t even start construction until next month has been pre-sold.
Ross sees “a fantastic level of activity of users looking to purchase because of the low interest rates and the availability of attractive small-business loans.”
Koll plans to follow up the Plantation by developing an adjacent 12-acre site. The company will build four industrial facilities, ranging from 30,000 to 70,000 square feet each
Trammell Crow, meanwhile, has three industrial speculative sites and one commercial site in Industry in various stages of development. The largest of the industrial sites is a 308,000-square-foot distribution center at 888 Kearn Creek, which is slated for completion next month.
The commercial site is Phase II of the Concourse, which Trammell Crow will develop for AEW Capital Management, a Boston-based pension fund. Construction on the 80,000-square-foot site will start in the first quarter of 1999.
Among the major deals that took place in Industry during the third quarter was the acquisition of the 572,224-square-foot Industry Distribution Center for $22.6 million by EastGroup Properties, a Jackson, Miss.-based REIT, from CSER-IDC of Denver.
El Monte Center, a 417,000-square-foot retail facility at 3530-3610 N. Peck Road in El Monte, changed hands. Porto Palos Verdes, a Van Nuys-based partnership, purchased the center for $30.3 million from H-K Peck Partners in Los Angeles.
In Irwindale, Jac Mar Cos., a food distributor, purchased 4.04 acres at the Cal Mat Business Center from Cal Mat Properties for $1.4 million. The company plans to build an 80,000-square-foot corporate headquarters and food processing facility. The project is scheduled to break ground by the end of the year.
Things remained fairly soft in the San Gabriel Valley’s office market, with vacancies at 20.9 percent, compared with 20.2 percent in the second quarter, according to Cushman & Wakefield.
“Typically the market slows down in October, but this year things have been slowing down since Labor Day, although it’s still a lot better than 1997,” said Amy McNamara, senior associate at Grubb & Ellis.
The office market has become an attractive alternative to Orange County or downtown Los Angeles because of its comparatively low rents and central location. McNamara sees most activity in the eastern San Gabriel Valley, west of the 605 Freeway, where there is still a dwindling inventory of large blocks of class-A and B office space left.
In fact, the strong demand for large, contiguous blocks of class-A office space has set off a series of proposed speculative developments.
Trammell Crow, in conjunction with Tooley & Co., is working on a speculative development in Diamond Bar. The development, named Gateway Corporate Center, will include four office buildings, with 280,000 square feet of class-A office space. Construction is scheduled to start in the fourth quarter of this year and the center is expected to be finished by the end of next year. It will be the first speculative office development in the San Gabriel Valley in years, according to Phil Lombardo, senior vice president with Trammell Crow.
Three other major commercial projects in the San Gabriel Valley are on the drawing board. In South El Monte, the 200,000-square-foot La Fiesta Entertainment Center is planned near the 60 Freeway. The center, which is being developed by the Venture Retail Group, will include a 20-screen movie theater, restaurants and a food court, and is scheduled to open in the fall of 1999.
In West Covina, development plans were revealed for the BKK landfill site on Azusa Avenue. The plans call for a 20-lot business park and an 18-hole golf course on the 656-acre site.
Also, in Monterey Park, a major retail center is planned for a 45-acre Superfund site just north of the Pomona Freeway. Greenfield Development of Bellevue, Wash., is negotiating to buy the site from its current owners, AHAS Inc.
Major Events
? Metro Properties bought Terrado Plaza in Covina from 750 Toronto Associates for $4.9 million.
? Porto Palos Verdes acquired El Monte Center from H-K Peck Partners for $30.3 million.
? Eastgroup Properties acquired Industry Distribution Center in Industry from CSER-IDC for $22.6 million.
? CTX International signed a $17 million lease for 321,600 square feet of industrial space at the Plantation Business Center in Industry.
? Delta Technical Coatings signed a five-year lease for 112,000 square feet at 2690 Pellisier Place in Industry.
? California Cartage signed a new lease for 220,000 square feet at 13060 Temple Ave. in Industry.
