Contributing Reporter

The South Bay real estate picture continued to improve in the third quarter as vacancy rates declined and rents increased for both office and industrial properties.

Office vacancies fell from 17.3 percent in the second quarter to 16.0 percent in the third, according to Cushman & Wakefield Inc.

The El Segundo market continues to hold its own, providing the backdrop for two of the top three South Bay office leasing deals this quarter, according to Cushman & Wakefield. Ernst & Young took 57,000 square feet in the Pacific Corporate Towers building at 200 Sepulveda Blvd., and EDS took 50,744 square feet of sublease space in the Continental Park building at 2120 Park Place.

The third-biggest leasing deal involved Maritz Marketing Research, which will take 27,500 square feet at the Freeway Business Center in Long Beach.

The activity put some upward pressure on rents, which rose from an asking office lease rate of $1.49 in the second quarter to $1.50 in the third, according to Cushman & Wakefield.

There were several large purchases of office properties during the third quarter, especially in Long Beach. Toronto-based TrizecHahn Corp. bought Landmark Square, a 24-story office tower at 111 W. Ocean Blvd., for $86 million. The tower was 86 percent occupied at the time of its purchase. TrizecHahn also bought Shoreline Square, another prime office tower in downtown Long Beach, for an estimated $60 million.

Despite TrizecHahn's apparent confidence in the area, Cushman & Wakefield's Jim Jandro says the Long Beach market still has a space glut as a result of Raytheon Co. acquiring the defense and aerospace businesses of Hughes Electronics Corp., and Boeing Co. taking over McDonnell Douglas Corp. "Those actions are going to put some sublease space back on the market," Jandro said.

In El Segundo, Candle Corp. of Santa Monica committed to buy the 555,000-square-foot Rockwell building from AEW/Layton Belling & Associates, though the deal will not be finalized until January.

On the development front, the Continental Grand Plaza Phase II, a 240,000-square-foot speculative building in El Segundo, broke ground, and Morgan Stanley Real Estate Co. is developing a build-to-suit of approximately 180,000 square feet for Infonet at Grand Avenue and Nash Street in that city.

Nearby at the corner of Mariposa and Nash streets, Majestic Realty Co. is building a new practice facility for the Kings and Lakers on a piece of land Majestic bought during the second quarter.


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