Vacancy rates in the San Gabriel Valley's sprawling industrial real estate market fell in the second quarter as tenant demand continued to outpace supply.

The situation could get even tighter as Asia recovers from its economic slump and trade volumes start rising accordingly. And if the Alameda Corridor East is ever built, the San Gabriel Valley market would likely boom.

But even without that rail extension, and much of Asia still wobbly, the valley is very strong.

"As soon as anything's built, it's sold or leased," said Jim Center, senior vice president at Grubb & Ellis Co.

Trammel Crow Co. Senior Vice President Phil Lombardo said, "there's virtually no new product in the northern and western parts of the valley. There's a continued demand of (industrial real estate) product close to Los Angeles. The market is extremely tight."

For the April-June period, the industrial vacancy rate was 4.0 percent, down from 5.0 percent in the first quarter.

Developers are responding to these market conditions, but cautiously. "Most of what I'm seeing is measured development," Lombardo said. "The San Gabriel Valley will have no problem with overbuilding."

One of the biggest projects on tap is the 55-acre Irwindale Business Center. Trammell Crow plans to break ground in the fourth quarter on the 800,000-square-foot first phase, which is slated to be completed by the second or third quarter of 2000. The entire multi-phase project is designed to ultimately contain 1.2 million square feet of space.

Much further along is the 191,000-square-foot Turnbull Canyon Distribution Center in City of Industry, which is due to be completed by next month. The Grand Avenue Distribution Center project, a joint venture of Prudential Real Estate and Wohl Property Group, recently broke ground in Walnut. The project will feature two distribution facilities totaling almost 600,000 square feet of space. It should be completed by the first quarter of 2000.

The first phase of a $70 million, 71-acre development in the City of Industry called the Plantation Business Center was completed during the second quarter. It contains more than 600,000 square feet of space. Koll Development Co. recently broke ground on the second phase, and earlier this year it acquired more than 35 additional acres in the City of Industry for a third phase. The Plantation is designed to contain more than 1.4 million square feet when finished.

CTX International had been negotiating with Koll to lease one of the Plantation's 321,000-square-foot buildings, but it pulled out of that pending deal in the second quarter, so the building is back on the market.

One of the Plantation's second-phase buildings currently under construction, a 30,758-square-foot structure, already has been purchased by Hupa International, a manufacturer and distributor of sporting goods.

Another second-quarter deal was Universal Warehouses' lease to occupy the entire Kearn Creek Distribution Center in the City of Industry.

Meanwhile, the San Gabriel Valley's office market hit 20.0 percent, up from 18.3 percent in the first quarter, according to Cushman & Wakefield Inc.

Even so, the average asking monthly lease rate rose to $1.62 a square foot, up from $1.54 in the first quarter. A higher vacancy rate could reflect new space coming on the market (especially in the Diamond Bar area), rather than tenants leaving. In fact, office tenants from a broad range of nearby markets have been expressing interest in the San Gabriel Valley in recent months.

Lombardo said several Orange County firms, in particular, have been calling him to inquire about office property.

"The San Gabriel Valley is more functional for many firms because it is centrally located to Orange County, San Bernardino and Los Angeles," he said.

Another factor drawing Orange County firms, he said, is the San Gabriel Valley's relatively high "parking ratio," the number of parking spaces allocated for a given amount of office space.

The strengthening office rents may have been a factor in several investors deciding to buy San Gabriel buildings during the second quarter. The sales included an acquisition of three buildings in the Gateway Corporate Center in Diamond Bar by a joint venture of ING Realty and the Muller Co. and the purchase of Cameron Court in West Covina by the Silagi Family Trust.

Major Events

? Grand Avenue Distribution Center, a joint venture of Prudential Real Estate and Wohl Property Group, broke ground in Walnut.

? Koll Development Co. completed the first phase of its $70 million, 71-acre development in City of Industry, the Plantation Business Center

? CTX International pulled out of its pending lease deal with Koll Development to occupy one of the Plantation's 321,000-square-foot buildings, putting the building back on the market.

? Universal Warehouses leased and occupied the entire Kearn Creek Distribution Center in the City of Industry.

? Construction of the 191,000-square-foot Turnbull Canyon Distribution Center in City of Industry nears completion, with the project ready for occupancy by this summer.

? A joint venture of ING Realty Partners and the Muller Co. bought three buildings in the Gateway Corporate Center in Diamond Bar.

? The Silagi Family Trust bought Cameron Court, an office project in West Covina.

? Crown Prince, a seafood distributor, bought a 43,467-square-foot industrial building in the City of Industry from Turner Development Corp.

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