After being pummeled by aerospace industry losses for much of the late 1980s and early '90s, the South Bay industrial real estate market is seeing something of a rebirth. The area has posted its lowest industrial vacancy rate in 10 years and is finally starting to see some construction activity.

The vacancy rate for South Bay industrial space is 6.8 percent, about half the 13 percent vacancy at the end of 1993, according to Grubb & Ellis Co.

Further, if the obsolete, "non-leasable" space is backed out, the vacancy rate may be as low as 5 to 6 percent, said Terry Reitz, senior vice president at Grubb & Ellis. "It's difficult to go too much lower because this coming year there will be some spec space being built, plus normal turnover creates a certain vacancy factor."

To meet this increased demand for space, South Bay developers have begun major speculative industrial projects for the first time since 1991.

Carson Cos., for example, has begun building a 67,000-square-foot spec industrial project in the Dominguez Technology Center on the north end of Carson the company's first industrial project since 1993.

Shortly after construction began, Henry Bath Inc. expressed interest in leasing the entire building, said Matt Vanderhorst, senior vice president at Carson Cos. The London-based metal distributor signed a lease in April at a monthly rate of 42 cents per square foot.

Carson Cos. is now considering beginning construction on two additional buildings (for a total of 250,000 square feet) in the same industrial park by the end of the year.

Another large South Bay developer, Watson Land Co., plans to begin construction on five industrial buildings in Carson this fall, said President Dick Cannon. He said space in two of the buildings will be leased by large international companies planning to expand in the South Bay, but he would not identify the companies.

Another indication of resurgence is the increased appetite of investors. In the second quarter, Seattle-based Kennedy Associates Real Estate Counsel Inc. purchased a total of 500,000 square feet of industrial space in seven buildings in the Carson area, and San Francisco-based RREEF Fund purchased 1.1 million square feet of space in seven buildings in Carson.

Despite the marked improvement in the industrial sector, office vacancy rates changed little during the quarter in most submarkets. And the overall South Bay office market, with a 21 percent vacancy rate, still lags L.A. County's overall 16.5 percent vacancy rate.


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