Expansion-Fueled Activity Sees New Projects Rapidly Absorbed
By ANDY FIXMER
Sales and leasing activity for Mid-Cities industrial properties remained high during the first three months of the year, as tenants and buyers snapped up mostly small to mid-sized warehouses and manufacturing facilities.
Activity in the Mid-Cities, a gritty industrial swath stretching southward from Vernon to Carson, totaled 2.1 million square feet bought and leased in the first quarter of 2004, according to numbers compiled by Grubb & Ellis Co.
The figure marks a 45 percent increase in activity from the 1.4 million square feet bought and leased the previous three months and a 15.5 percent rise from the first quarter of 2003.
Real estate brokers say the uptick in business began in January and is largely a reflection of companies moving forward with expansion and relocation plans that have been dormant since the recession.
"The level of confidence has been increasing with employers and businesses in the area," said Andy White, an associate in the Anaheim office of CB Richard Ellis. "They held off on their plans while the economy was slow but since the beginning of the year, they've started to take action on some of those things."
Vacancy rates rose to 4.7 percent in the first quarter from 4.3 percent in the previous three months and 4.1 percent in the year-ago first quarter. Nevertheless, the market has absorbed more than 2.5 million square feet of new industrial buildings added in the Mid-Cities region since January 2003.
Currently, about 1 million square feet of industrial space is in various stages of construction in the Mid-Cities region, according to Grubb & Ellis.
Asking rents remained constant at 50 cents a square foot. Buyers, looking to complete transactions before an expected rise in interest rates, snapped up properties in the first quarter. "There was a spike in leasing activity in the smaller to mid-size industrial buildings, as well as continued strong activities in buildings for sale," said John Biven, a CB Richard Ellis senior vice president.
While sales activity has remained constant over the past several quarters, leasing varies widely. In the first three months of 2004, leasing activity was the best it has been in years.
There were 35 deals in the first quarter, including nine sales and 26 leases, said Rick McGeagh, a CB Richard Ellis senior vice president.
Nearly 1.2 million square feet was bought and leased in March, the first month to have more than 1 million square feet of activity since August 2002. This marked the highest absorption the market has seen since June 2000, McGeagh said.
The leasing increase also reflects buyers giving up on finding deals on buildings for sale and instead finding space to rent.
"Some of that I think was users that have been searching for buildings to purchase, figuring out they aren't going to find what they want and instead getting a good value in leasing," he said.
The largest lease of the quarter was for a 140,000-square-foot industrial building at 14647 Northam St. in La Mirada. CSI/Crown Inc., which does business as Express Global, signed a five-year lease with landlord Majestic Realty Co. worth $3.4 million.
Kenko Freight Systems Inc. signed a five-year lease for 82,000 square feet at 13527 Orden Drive in Golden Springs Business Park in Santa Fe Springs worth $2.6 million with landlord Golden Springs Development Co.
And Global One Logistics signed a three-year lease for 88,197 square feet at 1196 Washington Blvd. in Santa Fe Springs worth about $1.4 million.
One large sale that took place during the quarter was Ultimate Freight Management Inc.'s purchase of a 57,176 square foot warehouse at 9215 Hall Rd. in Downey from seller Johnston-Optimus LLC.
Another large transaction was Coated Fabrics Co.'s purchase of a 46,793-square-foot warehouse at 12658 Cisneros St. in Santa Fe Springs. Coated Fabrics paid close to the $3.9 million price being asked seller Proficiency Capital Corp.
-CSI/Crown Inc., which does business as Express Global, signed a 5-year, $3.4 million lease for a 140,000-square-foot industrial building at 14647 Northam St. in La Mirada with landlord Majestic Realty Co.
-Kenko Freight Systems Inc. signed a 5-year lease for 82,000 square feet at 13527 Orden Drive in Golden Springs Business Park in Santa Fe Springs.
-Global One Logistics signed a three-year lease for 88,197 square feet at 1196 Washington Blvd. in Santa Fe Springs.
-The Los Angeles County Department of Education leased 73,370 square feet of office space at 10100 Pioneer Blvd. in Santa Fe Springs in a 10-year, $15 million deal.
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