Downtown Long Beach and the city’s airport are separated by just a few miles, but the office markets in those two areas are quickly moving in opposite directions, reflecting broader changes in the local economy.
The port city’s downtown improved during the quarter, absorbing 41,000 square feet of office space and reducing its vacancy rate to 13.8 percent, the lowest it has been in more than two years.
Meanwhile, the suburban office market, largely made up of buildings near the airport, is getting emptier. It gave back 100,000 square feet, raising the vacancy rate more than two points to 24.2 percent, according to Jones Lang LaSalle Inc.
Those trends are likely to continue as they’re tied to the growth of international trade and the downsizing of the aerospace industry. The Port of Long Beach is expected to buy or lease about 170,000 square feet for a new downtown headquarters by the end of the year. Such a transaction could cut the urban core’s vacancy rate by five points. But Boeing Co., which has had a large local presence, is continuing to downsize, swamping the already flooded suburban market.
“We haven’t seen the worse of it,” said Jason Fine, a vice president in Jones Lang LaSalle’s South Bay office. “There’s a fair amount of activity and tenants that are looking, but they can’t keep up with the giveback space from Boeing.”
The Chicago-based aircraft maker, which in 2010 announced it was moving hundreds of Long Beach jobs to Oklahoma City, will vacate about 300,000 square feet by the end of the year. That could drive the suburban market’s vacancy rate to perhaps 28 percent, Fine said.
Meanwhile, the South Bay’s sprawling industrial real estate market softened as optimism about an improving economy faded. A flurry of sale and leasing activity six months ago gave way to tenants downsizing or shelving expansion plans, with 577,000 square feet returned to the market in the quarter.
“There just wasn’t as much activity. The large transactions have been missing,” said Jim Biondi, a vice president with Newmark Grubb Knight Frank in Torrance.
Sales and leasing activity totaled 2.3 million square feet, down nearly 50 percent from the previous quarter. That drove up the industrial vacancy rate by a half-point to 5.9 percent, about where it had been for most of the past two years. Average asking rents dropped to a three-year low of 54 cents.
– James Rufus Koren
Main Events
Omninet Capital, an investment firm headed by Beverly Hills billionaire Neil Kadisha, bought a 490,000-square-foot office building in Long Beach for $69 million. The 30-year-old property, at 1500 Hughes Way near the Long Beach Airport, was purchased from New York property investor Lexington Realty Trust. The building is 74 percent leased, according to CoStar Group.
Industrial Income Trust Inc., a Denver real estate investment trust, bought a 184,000-square-foot warehouse at 1580 Francisco St. in Torrance for about $15 million. The deal with Irvine developer Sares-Regis Group closed in May. The Class B building is leased to DFS, a company that operates duty-free shops at Los Angeles International Airport.
Rancho Dominguez trucking firm Green Fleet Systems leased a 147,000-square-foot distribution center with new office space at 20500 Alameda St. in Carson. The five-year deal with landlord CenterPoint Properties of Oak Brook, Ill., is valued at $5.4 million.
Vernon property investor 45th Street LLC bought the former headquarters of apparel company Big Dog Holdings Inc. for about $16 million from FFI Properties Inc., a firm controlled by Big Dog’s former principals. The sale of the 400,000-square-foot building at 4700 S. Boyle Ave. in Vernon closed in April.
A San Pedro shopping center changed hands for $62 million. First Washington Realty Inc. of Bethesda, Md., purchased the 200,000-square-foot Park Plaza Shopping Center at 800 Western Ave. from Regency Centers Corp. of Jacksonville, Fla., and the California Public Employees Retirement System. A Sprouts Market is the center’s anchor tenant.
