Major Events:
– National Retail Services leased 116,000 square feet of industrial space at 355 W. Carob St. in Compton.
– International Rectifier expanded by signing a nearly 10-year lease for 53,000 square feet of space at $2.77 a square foot at 101 N. Sepulveda Blvd. in El Segundo.
– Honeywell signed a lease to rent 60,000 square feet of office space at 2545 W. 190th St. in Torrance.
Vacancies in the South Bay area, which has been hit hard by the economic downturn in the past year, climbed for the third quarter in a row as companies either closed their doors or consolidated into smaller office spaces.
The total vacancy rate for commercial office space grew to 16.2 percent in the third quarter, up from 14.2 percent in the second quarter of 2001 and 12.6 percent during the first quarter, according to Grubb & Ellis Co.
Of all the L.A. County real estate markets monitored, the South Bay area had the highest negative net absorption rate during the third quarter, totaling 649,809 square feet. There was about 400,000 square feet of office space under construction.
On the industrial front, the vacancy rate inched up slightly to 4.6 percent in the third quarter, compared with 4.5 percent in the second quarter.
“I think it is a general across-the-board retrenchment of business as a result of the downturn in the economy,” said Jim Biondi, senior vice president at Grubb & Ellis Co.
The area was hit hard by the dot-com collapse. Several Internet companies that expanded rapidly snapped up major office space in Manhattan Beach and El Segundo. The South Bay was the second choice for many Web entrepreneurs who couldn’t get into the Santa Monica and West Los Angeles markets.
Now all this office space sits on the market in the form of sublease space. Real estate professionals say it could take 12 months to 15 months for the market to absorb this space.
“The bulk of the vacancies and sublease space is located in El Segundo,” said Stephen Cramer, senior vice president of Colliers Seeley International.
The resulting defense buildup from the Sept. 11 attacks could, however, be a boost for the area. Defense-related businesses are renewing their leases and looking for extra space.
TRW Space & Defense Group recently signed leases to rent two offices near the company’s main campus in Redondo Beach known as Space Park. TRW also recently renewed its lease for 155,000 square feet of space at Manhattan Towers located at 1230 and 1240 Rosecrans Ave.
Boeing Co. recently signed a four-year lease for 50,000 square feet of office space on Imperial Highway in El Segundo.
And two companies have put out the word they are looking for more space for expansion. Northrop Grumman Corp. needs 50,000 additional square feet of space in the South Bay area. Japan Airlines, which already has a large office in El Segundo, is on the prowl for 50,000 square feet of office space to expand its operations despite troubles in the travel industry.
“I think we are starting to see demand come out of the market for companies that are obviously planning for future expansion,” said Cramer of Colliers Seeley.
That’s good news for people like Alex Rose, director of development for Continental Development Corp., which has spent years developing Continental Park, an 86-acre office campus in El Segundo.
The company is finishing the last two buildings in the park. The Atrium, nearly 300,000 square feet of office space on Rosecrans Avenue, should be completed by the end of the year. Already a lease has been signed with Fleming’s Prime Steakhouse & Wine Bar, an 8,000-square-foot eatery that is now under construction, Rose said.
The Continental Business Center, a two-story, 25,000 square foot building at 14650 Aviation Blvd. in Hawthorne, will be ready in mid-November, although no one has signed a lease yet. But Rose is unruffled by the slowdown. “In our opinion it is not a panic time because the tenant make-up is so much different now than when we went through a major downturn eight or nine years ago,” Rose said. “Things will pick back up early next year or in the second part of next year.”
These two buildings are the last parcels available for development in Continental Park.
The industrial real estate market has softened too. The vacancy rate has climbed due to a number of elements.
“There is a general indecisiveness of watch the economy and watch where business is going,” said Kirk Johnson, vice president of real estate development for Watson Land Co. which in the last two months has signed new deals totaling 450,000 square feet of space and renewed leases totaling 700,000 square feet.
But although caution is in the wind, Johnson is optimistic the economy will begin to turn around early next year when Watson finishes two more industrial buildings totaling 425,000 square feet at the Dominguez Technology Center and the Watson Corporate Center in Carson.
