Leasing and sales activity was nearly flat in the third quarter in the primarily industrial Mid-Cities region as the pool of property for sale shows signs of drying up.
Nearly 1.9 million square feet were leased or sold in the industrial strip running from south of downtown Los Angeles through the South Bay during the three months ended Sept. 30, according to Grubb & Ellis Co. That's a 7.9 percent increase over the second quarter, when 1.7 million square feet was bought or leased, and 58.4 percent higher than the 1.2 million square feet a year ago.
"Resurgence in leasing started in March," said Rick McGeagh, a senior vice president at CB Richard Ellis Inc., who completed several transactions in the area in the third quarter. "That increase in leasing carried on through this quarter."
Net absorption the amount of available space taken off the market due to sales and leasing activity was 50,211 square feet in the third quarter, down from 659,000 square feet the previous three months.
J.C. Casillas, research services manager for L.A. County at Grubb & Ellis, attributed the difference to the quick lease-up of the 2 million-square-foot Pico Rivera Commerce Center.
The project, developed by Sares-Regis Group on a former Northrop Grumman Co. site, was 87 percent occupied just five months after construction was completed. "There's been some growth in the third quarter, but it's been slow," Casillas said. "A lot of people are renewing their existing leases and the space changing hands is continuously occupied."
The third quarter vacancy rate of 4 percent was virtually unchanged from the 4.1 percent rate of the second quarter. In the year-earlier period the rate stood at 4.5 percent.
While average asking rents remained flat at 50 cents per square foot, effective rents the actual price per square foot paid in a lease crept upward. Actual lease prices were about 49 cents on most leases in the third quarter, up from 43-45 cents during the second quarter, as businesses increasingly turned to leasing because of the short supply of property for sale.
Much of the activity was centered in the Santa Fe Springs area, including the sale of the Santa Fe Springs Business Park by real estate investment advisors RREEF Funds LLC to financial services provider Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF) in August.
The 37-acre park has 36 buildings totaling 631,279 square feet. Its tenants occupy warehouse and light manufacturing spaces of 1,000 to 36,000 square feet. The project was sold for an undisclosed amount as part of a nationwide 3 million-square-foot portfolio sale, said McGeagh. CB Richard Ellis represented both buyer and seller.
"Santa Fe Springs has one of the biggest new projects in the whole region, the Golden Springs Center. Unlike Cerritos and Norwalk and other cities in the area, Santa Fe Springs has quite a bit of new development going on," said Mike Foley, senior vice president at Trammell Crow Co. "The city has also been very stable and predictable they've developed a pro-business environment that gives an alternative to central Los Angeles where a lot of these companies are moving from."
Also in Santa Fe Springs, Prime Source leased a 140,000-square-foot storage and distribution facility in the Golden Springs Business Center, the 265-acre business park with 26 buildings. Grubb & Ellis represented the lessee in that deal.
Alere Property Group purchased a 131,125 square foot space from ACI Distribution at the 455,000-square-foot Bloomfield Business Center in Santa Fe Springs for an undisclosed price, according to Laird Perkins, a senior vice president at CB Richard Ellis representing Alere.
Beaulieu of America, a flooring manufacturer based in Dalton, Ga., sold its 287,000-square-foot warehouse facility at 15300 Desman Ave. in La Mirada in a sale-leaseback deal. Beaulieu, in turn, sublet 125,000 square feet to wholesale toy distributor Levin & Schneider Distribution for 39 cents a square foot for 40 months, said Joel McCabe, a principal of the McCabe Co. who represented L & S. CB Richard Ellis represented Beaulieu.
Medical supplies wholesaler Twin Med Inc., based in Vernon, leased a 105,000-square-foot storage and distribution space at 11333 Greenstone Ave. in Santa Fe Springs, including 9,000 square feet of office space that will serve as its headquarters, according to Perkins, who represented the landlord, Western Realco/AEW. The five-year lease closed for 47 cents a square foot, giving Twin Med about half of the six-year-old, 215,000 square foot building.
Perkins was upbeat about the leasing market for the coming quarter. "The key number is if, at the end of the year, we have a positive net absorption, which means the market is improving," he said. "And I think we will."
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