Developers Vie to Meet Demand By Building Small Infill Projects
By LAURENCE DARMIENTO
It's starting to get repetitive in the San Gabriel Valley.
A still-shaky economy combined with persistent low interest rates resulted in tepid demand for leased industrial space but high demand for anything up for sale.
However, there is little new sales product in the largely built-out, 170 million-square-foot market, which has prompted developers to find even small infill projects attractive.
"It kind of reminds me of the movie 'Groundhog Day,'" said Grubb & Ellis Co. real estate broker Rick Sheckter, referring to the film in which the main character repeats one day over and over. "It's the same story."
The vacancy lease rate inched up to 2.4 percent from 2.3 percent in the fourth quarter, as total industrial sales and leasing activity remained virtually constant at 1.9 million square feet. Asking rents were up 1 cent per square foot from the fourth quarter to 44 cents exactly where they were in the year-ago first quarter.
The 14.4 million-square-foot office market wasn't much different. Vacancy rates also inched up to 11.6 percent from 11.4 percent, as the market gave back nearly 30,000 square feet of space. Even so, asking rents rose 3 cents per square foot, to $1.96.
With such high demand for sales product, there was movement by developers to fill that demand, even if they could only find small parcels that had been less desirable.
Cushman & Wakefield has decided to build two separate projects in Industry and Pomona, each on less than 10 acres. The Industry project will feature four buildings from 25,000-40,000 square feet in size, a range in high demand by the Valley's myriad small firms.
The Pomona project will be even smaller, aimed at entrepreneurs wanting 8,000-25,000 square feet. "With the low interest rates, everybody wants to buy something," said Cushman & Wakefield broker Erik Larson.
Inland Empire developer Erin Madison Group is also building a 5.5-acre project in Pomona that will feature six buildings ranging from 10,000-22,000 square feet. Sheckter, who has the listing, said the demand for sales product has pushed more development to Pomona, as existing owners there with marginally productive space sell out.
Meanwhile, demand in the San Gabriel Valley continued to be driven by the area's Asian-based, import-export economy.
Sun-Yin U.S.A. LLC, which sells bed sets and other linens to Wal-Mart Inc. and other low-price retailers, purchased a 181,000-square-foot building at Machlin Court in Industry for more than $11 million, or $61 a square foot. The company, which had several locations, was expanding and consolidating.
"We are having more demand from Asian business that have been importing and exporting, but these buildings (they want) are getting bigger than 10 years ago," said Shan Lee, executive vice president at GVA Daum, a broker on the deal.
In a smaller deal, Media One Co., a growing compact disc manufacturer based in South El Monte, also expanded and consolidated its operations at an 80,000-square-foot building on Montoya Street in Irwindale. It was bought for $3.7 million, or $46 per square foot, which is healthy for the area.
In contrast to the buying activity, leasing has been slower. The 1.2 million-square-foot Irwindale Business Center, a former mining pit redeveloped by Trammell Crow Co., still had 94,000 square feet available for lease at the end of the first quarter.
Still, there were large lease deals in the quarter, including one in which a bidding war broke out.
ITT Industries Inc. beat out an undisclosed bidder for a 74,000-square-foot building on Shamrock Avenue in Monrovia, signing a seven-year lease valued at $5.5 million. A subsidiary, ITT Systems, will move for its Jet Propulsion Laboratories contract.
In another large lease deal, Poundex Associates Corp., a furniture manufacturer with overseas factories in Asia, leased a 127,000-square-foot warehouse on Turnbull Canyon Road in Industry. The three-year deal was for 44 cents a square foot, full service gross (which includes insurance and other costs).
-Linen maker Sun-Yin U.S.A. LLC purchased a 181,000-square-foot building in Industry for more than $11 million, or about $61 a square foot.
-Media One Co., a South El Monte compact disc manufacturer, expanded and consolidated operations at an 80,000-square-foot building in Irwindale it bought for $3.7 million, or $46 per square foot.
-ITT Industries Inc. beat out another bidder for a 74,000-square-foot building in Monrovia, signing a seven-year lease valued at $5.5 million for a subsidiary awarded a Jet Propulsion Laboratory contract.
-Poundex Associates Corp., a furniture manufacturer with factories in Asia, leased a 127,000-square-foot Industry warehouse for three years at 44 cents a square foot, full service gross.
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