Third quarter industrial real estate activity in the Mid-Cities area reached a peak not seen in recent years, as tight surrounding submarkets drove tenants seeking large spaces to Pico Rivera and Santa Fe Springs.
Sales and leases in the corridor running from the ports of Los Angeles and Long Beach to just south of downtown Los Angeles totaled 3.1 million square feet in the July-September period, according to Grubb & Ellis Co.
That was 54.5 percent higher than the 1.9 million square feet bought and leased in the second quarter and 63.5 percent higher than the year-ago period.
Lease rates also were on the rise as activity picked up after several years of low interest rates prompting users that serve port importers to purchase rather than lease warehouse and distribution space larger than 150,000 square feet.
"This was a uniquely active quarter for this area," said John Biven, first vice president at CB Richard Ellis Group Inc. "It was the highest total activity we've tracked out there in over 10 years."
That was reflected in the region's 3.4 percent third-quarter vacancy rate, which fell from the second quarter when vacancies were at 4.3 percent.
It also was reflected in the net absorption rate, which was significantly higher in the third quarter, with 1.1 million square feet of space taken off the market. That reversed negative net absorption of 472,000 square feet in the prior quarter, when large chunks of space at several new large business parks came on the market.
The resurging market for industrial leases was evidence of the continuing drive by investors for warehouse and distribution space serving the surge of imports from Asia coming into the ports of Los Angeles and Long Beach, said Cameron Merrill, a commercial broker at CB Richard Ellis.
And with other nearby submarkets like Central Los Angeles and the San Gabriel Valley sporting vacancy rates at or near 1 percent, that meant renewed interest in Mid Cities.
"The leasing market was weak for about a year and a half, and it's become very solid now. The vacancy rates are very low, and people who were trying to buy buildings are just not finding them anymore, so they're turning back to leasing. Sale prices are still absolutely through the roof," Merrill said.
Among the largest transactions, St. George Warehouse Inc. leased 454,800 square feet at the 265-acre Golden Springs Business Park in Santa Fe Springs. The third-party logistics company, represented by CB Richard Ellis, signed the lease in August for an undisclosed sum.
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