Contributing Reporter

The San Gabriel Valley's already-hot industrial market continued to sizzle during the second quarter.

Of the roughly 129 million square feet in the market, just 6.8 million are available, or 5.3 percent, down from 6.1 percent at the end of the first quarter, according to Cushman & Wakefield of California. Particularly tight is the El Monte/Whittier submarket, where the industrial vacancy rate is 1.6 percent.

"It's a continuation of the same story as in the first quarter," said Jim Center, senior vice president at Grubb & Ellis Co.'s City of Industry office. "Demand remains strong across a broad spectrum of properties. Right now we're seeing multiple offers on properties."

Center attributes much of the strength to the improving economy and "a big Asian influence that gives this market an advantage over other areas of Southern California. (Asians involved in trade with Asia) tend to live in the area, and that has a big impact on this portion of the market. Right now, it's the hub of the wheel in terms of manufacturing and distribution between L.A. and San Bernardino County. It's the center point for activity that goes in either direction."

Added Phil Lombardo, vice president at Trammell Crow Co.'s L.A. office: "In terms of larger spaces 150,000 square feet and up there's very, very little, if anything, out there. And there's hardly anything modern. Majestic Realty had until recently a fair amount of second-generation buildings available because of the exodus of some users looking for better space in other markets. But that space has all been released."

Illustrating the hunger for industrial space, Lombardo cites a spec property built by O'Donnell Development in City of Industry, all 256,000 square feet of which were leased, pre-completion, to Hills Pet Foods. "There's immediate absorption. It's a real good picture," Lombardo said.

Among the most closely watched properties is a massive speculative project in the City of Industry called The Plantation. Considered the premier example of its type in the market, the five-building, 70-acre development in the 500 block of Grand Avenue being built by Koll Co. is already 50 percent preleased, says Frank Geraci, senior vice president with CB Richard Ellis' City of Industry office.

One of the biggest industrial deals of the quarter was signed at The Plantation, where CTX Monitors leased just over 320,000 square feet 40,000 square feet of it for office space, and with a purchase option.

Another large industrial lease deal was signed by ServiceCraft, which will occupy 200,000 square feet in the City of Industry.

The principal tenant in the building being leased by ServiceCraft is GATX, which also just signed for space in a Majestic Realty building at Roland and Lawson in Industry. The logistics company also leased 250,000 square feet in Fairway Business Park in Industry, and will take over an adjacent building with another 250,000 square feet of space under what's expected to be a three-year lease.

"So Majestic is basically out of inventory for big boxes," said Stuart Milligan, senior marketing consultant at Cushman & Wakefield's downtown L.A. office. "In fact, vacancy rates in big-box spaces overall have tightened dramatically."

Other industrial space deals in the second quarter included Smart & Final's lease of 60,100 square feet at 600 Citadel Drive in Commerce, and AMP Computer Corp.'s lease of 10,000 square feet at the Gateway Computer Corp. building in Diamond Bar.

"A series of large transactions totaling more than 1 million square feet contributed to restrict supply," states Grubb & Ellis' mid-year report. "Both asking lease rates and sales prices are expected to rise by at least 5 percent this year."

The average monthly asking rent for San Gabriel Valley industrial space is 48 cents per square foot, slightly higher than the countywide average of 44 cents. The average asking rent for San Gabriel Valley research-and-development space is 61 cents, almost identical to the countywide average of 62 cents.

One new project that brings more R & D; space to the market is the 112,000-square-foot Industry Business Center, which is tailored towards small computer companies in the City of Industry.

Although the valley isn't known for its office sector, the office vacancy rate dropped to 20.2 percent during the second quarter from 20.9 percent in the first. That's enough to give the San Gabriel Valley the 10th-best drop in office vacancy rates among the 29 submarkets that Cushman tracks.

This marks the third consecutive quarter in which the San Gabriel Valley submarket's office vacancy rate has edged down. During the second quarter, about 42,500 square feet of space were absorbed in the region.

One notable lease was the Los Angeles District Attorney's Office's contract for 24,800 square feet at the Wells Fargo Bank Plaza in Commerce.

For reprint and licensing requests for this article, CLICK HERE.