Little deals can add up to a big deal, according to Santa Monica-based Macerich Co., a real estate investment trust that signed 60 shopping center leases for more than 118,000 square feet of space throughout the country during the first quarter of this year.
Tom Unis, vice president and national leasing manager, said rents were up 11 percent from the first quarter of 1996, a result of what he called "the stabilizing of retailing in general" and "the improved quality of our overall mix of centers."
The cumulative value of these little deals (average size is less than 2,000 square feet) is one reason retail REITs are hot and that investors have been moving toward shopping centers as investments, according to a number of industry sources.
Belief in the upside of shopping centers, of course, was a reason a fund connected with investment house Lazard Freres & Co. pledged $235 million a few weeks ago to Alexander Haagen Properties, a Manhattan Beach-based REIT. Haagen plans to use the funds to further expand its huge shopping center portfolio.
Among those who see an upside in shopping centers is Jack Mahoney, president of Summit Commercial Partners, an affiliate of El Segundo-based Highridge Partners.
According to Mahoney, Unis and other industry sources, the improving economy is picking up the long-flagging retail sector and making it more attractive as an investment. Summit has closed more than a dozen shopping center acquisition deals worth upwards of $250 million so far this year primarily neighborhood centers and expects to close another 30 or 40 deals by the end of the year. Mahoney said such centers have been out of favor with investors for awhile, partly because the office and industrial sectors have been performing well.
Many of the tenants in these neighborhood centers are the same type of small, "fill-in" lessees that Macerich inked in the first quarter. The deals are hardly worth mentioning individually, but taken as a group, they comprise a formidable force that Macerich officials expect to continue capturing.
L.A.'s high-tech industry picked up some of the slack created by the sagging fortunes of shoe manufacturer L.A. Gear when software developer CyberMedia leased 45,000 square feet of the L.A. Gear's headquarters building in Santa Monica Business Park in Santa Monica.
The 66-month sublease of space formerly occupied by L.A. Gear takes up the entire first floor of the three-story, 125,000-square-foot building, said Jerry Porter, president of Metrospace, who helped negotiate the $4.75 million deal. L.A. Gear, which has twice reduced the amount of space it occupies in the building, remains on the basement, second and third floors of the building.
The move is an expansion for CyberMedia, which markets software products called First Aid and Oil Change. CyberMedia already has 27,000 square feet of space in an adjacent building and may keep all or part of that existing space along with the new space, said Porter. Broker Jim Travers represented CyberMedia in the deal.
Entertainment companies' big appetite for commercial space on the Westside of Los Angeles was reflected in a relatively small lease to a cable TV company, according to Westmac Commercial Brokerage Co. brokers Lloyd Bakan and John Bertram.
The two represented owner Shephard Family Trust in leasing 31,000 square feet of space on Olympic Boulevard near Centinela Avenue to a cable programming producer called ODS Technologies.
Brokers say the lease reflects how any kind of space suitable for entertainment industry offices or production gets snapped up quickly. The ODS deal, valued at $2.7 million, is in an industrial building that formerly was devoted exclusively to warehouse space. Willa McNamara and Jeff Chasen of Beitler Commercial Realty Services represented the cable company.
Industrial leases in outlying areas of Los Angeles keep fueling the recovery in those markets. Among the latest to close was a 111,000-square-foot, five-year lease valued at $2.9 million that was signed by Pacesetter Inc., a manufacturer of heart pacemakers, next to the company's corporate headquarters in Sylmar.
Pacesetter will occupy about 65,000 square feet of the building initially and move into the balance of the space in March of 1998.
The company is expanding its operations, according to Grubb & Ellis Co. brokers on the deal, Jim Linn, Todd Lorber, Allen Trowbridge and Steve Valenziano. Brett Warner and Larry Twomey of Lee & Associates represented the landlord, Sylmar-based Telfair Corp.
In the City of Industry, Primrose East Coast, a wholesaler of silk flowers, plants and marble, has leased nearly 70,000 square feet of warehouse and distribution space in a 224,000-square-foot building at 18961 Arenth Ave. in a seven-year deal valued at $1.9 million.
Closer in, Jason Natural Products, a manufacturer and distributor of natural cosmetic products, has leased a 40,000-square-foot industrial building near L.A. International Airport to expand the 38-year-old company's operations, according to F. Ronald Rader, a Klabin Co. executive vice president who negotiated the deal for Jason along with Doug Marshall. Ken Simpson of the Klabin Co. represented the landlord, Industrial Developers of Beverly Hills, in the $1.2 million deal.
Transpacific Development Co. said last week that it will break ground July 1 for its previously announced, 50,000-square-foot speculative office building at its Cerritos Towne Center in Cerritos. The developer said the strong demand for space in Cerritos is evidenced by occupancy rates that have been running above 90 percent for several years at Cerritos Towne Center, a 125-acre project south of the Artesia (91) Freeway between the San Gabriel River (605) and Santa Ana (5) freeways, where it already has developed 385,000 square feet of office space.
Contributing reporter Bob Howard covers the real estate industry for the Los Angeles Business Journal.
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