By EDVARD PETTERSSON
The Mid-Cities area had a fourth quarter that befits a bustling economy: falling vacancy rates, steadily increasing rents and developers struggling to meet the pent-up demand for new space.
The industrial vacancy rate, including sublease space, stood at 3.8 percent for the last three months of 1998, compared with 7.2 percent for the like quarter a year earlier, according to Cushman & Wakefield Inc. Rents were at 45 cents per square foot, compared to 40 cents a year earlier.
The latest numbers are even more impressive considering that 2 million square feet of new industrial space was added in 1998. An additional 3.2 million square feet of space is expected to hit the market during the first half of this year.
"Lease rates will only come down if buildings sit on the market for months," said Chris Sheehan, industrial specialist with the Seeley Co. "Right now, most buildings are leased before they are completed, and I expect rates to stay firm."
Sheehan said demand is especially strong for big-box structures of 100,000 square feet and more. The strategic position of the Mid-Cities, along the freeways between downtown Los Angeles and Orange County and close to the ports of Los Angeles and Long Beach, makes it an ideal location for distribution companies.
Moreover, many of the industrial facilities are relatively modern, especially in Santa Fe Springs, which not so long ago was mostly an oilfield. Distributors and manufacturers are clamoring for those newer spaces, as opposed to the more antiquated ones near downtown.
"The fourth quarter has been absolutely great," said Darla Longo, senior vice president with CB Richard Ellis. "Demand has not let off, and it is one of the strongest markets overall in Los Angeles County."
Longo was involved in one of the quarter's largest industrial deals. Boston-based TA Associates Realty acquired the Cerritos Industrial Park on behalf of one of its institutional clients. Although the actual price TA Associates paid the seller, RREEF Funds, has not been disclosed, industry insiders speculate it was somewhere between $55 million and $60 million. The 20-year-old industrial park, which is comprised of 30 buildings located between the Golden State (5) and Artesia (91) freeways, was 100 percent leased at the time of sale.
Steve Batcheller, first vice president with CB Richard Ellis, who was part of the team that brokered the Cerritos Industrial Park deal, said many investors are looking to get a piece of the action. "Because of the really strong user demand, institutional owners love to own the new and modern facilities that become available," he said.
One of the most closely watched developments is the Golden Spring Business Center in Santa Fe Springs. The 265-acre industrial park is being developed on the site of the former Golden West Refinery by Golden Springs Development Co. That firm is owned by the Orden family, which also owns Thrifty Oil Co. Golden Springs will ultimately accommodate more than 5 million square feet of new industrial space.
The first building to be completed at Golden Springs was almost entirely pre-leased when Tyco Corp. leased 129,037 square feet for its Carlisle Plastics subsidiary. Tyco joins Central Garden & Pet, which will occupy an adjacent 115,159 square feet.
Meanwhile, construction has started on a second structure at Golden Springs. The 426,000-square-foot speculative site will be the largest available space in the Mid-Cities and will be delivered by the end of the first quarter.
Also in Santa Fe Springs, the MC & C; Commerce Center is slated for completion this quarter. The site is being developed by McGranahan Carlson & Co. and includes nine buildings with 536,000 square feet of available space. Batcheller said each building is already either leased, in escrow, or has offers pending.
A third major project underway in Santa Fe Springs is a 355,000-square-foot distribution center developed by Pacific Theatres Realty Corp., a division of the movie exhibition company. Construction of the facility on the site of a former Pacific Theatres drive-in started in December. The structure is expected to be completed by July of this year.
During last year's third quarter, the volatile financial markets and economic malaise overseas sparked some anxiety among brokers, fearing a downturn in the market. These fears seem to have largely dissipated in the fourth quarter. "It hasn't quite disappeared, but people are more optimistic now," said Seeley's Chris Sheehan.
? Sirena Apparel Group Inc. leased a 207,000-square-foot industrial building at 2825 Santa Fe Ave. in Vernon.
? Windsor Art Inc. leased a 220,000-square-foot industrial building in Vernon at 444 Ayers Ave.
? Carlisle Plastics, a subsidiary of Tyco Corp., leased 129,037 square fee in the Golden Springs Business Center in Santa Fe Springs.
? Marine Truck Service signed a $1.95 million lease for 123,000 square feet of industrial space at 15700 S. Avalon Blvd. in Compton.
? TA Associates Realty acquired the Cerritos Industrial Park on behalf of one of its institutional clients from RREEF Funds for an undisclosed amount. The industrial park is comprised of 30 buildings located between the 5 and 91 freeways.
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