In the San Gabriel Valley, lease rates can only go up.
That’s the consensus after several large industrial deals in the third quarter consumed all the available space for larger users.
At Majestic Realty Co.’s Grand Crossing project in Industry, there were a spate of deals while Trammell Crow Co. remained in negotiation to lease its remaining property at the Irwindale Business Center.
That has left the Gateway Pointe project near Whittier, which is under construction, as the only project with space for larger users this year but the initial buildings will not be ready until next month.
“The market has tightened up significantly,” said Phil Lombardo, a senior vice president at Trammell Crow Co. “It took a while but rents are starting to go up, and they are going to go up more.”
Industrial asking rents in the 169 million-square-foot market shot up to 48 cents per square foot on a triple net basis (not including taxes, insurance and maintenance) from 41 cents in the prior quarter, according to Grubb & Ellis Co.
Sales and leasing activity fell to 2.2 million square feet in the third quarter from a torrid pace of 2.9 million in the second quarter, when more space was available.
Still, more than 800,000 square feet of space was absorbed, and the vacancy rate fell three-tenths to 1.5 percent, the lowest in the county.
Very big deals
The quarter saw the continuation of large deals that started earlier this year, topped by the lease of 600,000 square feet by toy manufacturer Jakks Pacific Inc. at the Grand Crossing industrial park in the eastern reaches of Industry.
The toy company had been leasing smaller space across the street and moved as part of an expansion, renting for seven years at 33 cents triple net for a total consideration of close to $17 million.
APL Logistics took 400,000 square feet at the park, also relocating from a smaller location in Industry as the growth in imports has continued to prompt companies to expand. The five-year deal was for 33 cents per square foot triple net for a total consideration of $8.5 million.
Standard Furniture Manufacturing Co., which makes mid-range furniture, relocated and expanded into 325,000 square feet at the park. It rented the space later in the quarter for five years at 41 cents triple net, reflecting the market’s tightening.
The three companies cornered the last available space at Grand Crossing this year. The project will total six million square feet when it is built out, but there will be no more space available until a 650,000-square-foot building is ready in September, nearly 12 months from now.
“It would be very, very nice now to have a building available,” said leasing agent Hank Darnell, a vice president at Majestic, noting that this is better than the situation several months ago, when weaker demand left 725,000 square feet vacant.
At the north end of the valley, Trammell Crow reported being close to signing a lease on the remaining 94,000 square feet at its Irwindale Business Center to an existing tenant that is expanding.
That leaves Gateway Pointe, being built by the Carpenters Pension Trust, as the only development in the San Gabriel Valley area with large space available.
The project, which will total 1.6 million square feet when built out, will have its first three buildings at 613,000, 260,000 and 77,000 square feet available in late November, said leasing agent Stu Milligan of Cushman & Wakefield Inc.
The project is being marketed at companies from the South Bay to the East San Gabriel Valley, with discussions under way with several potential users. Lease rates will be higher than at Grand Crossing.
In the San Gabriel Valley office market, the vacancy rate fell three-tenths of a point from the second quarter to 11.7 percent. With little office product under construction, brokers expect the rate to fall further.
