Are more tenants of South Bay's industrial buildings offering subleases?

The vacancy rate in the region's port-dependent industrial market rose eight-tenths of a point in the second quarter to 2.5 percent, mirroring an increase in the number of subleases offered by tenants.

"We are still in the 3 percent range as far as vacancy goes, which is healthy from a landlord's perspective," said Steve Bohannon, a director at Cushman & Wakefield. "But the predominance of sublease opportunities has hampered marketing efforts for landlords."

Indeed, the current downturn in the economy has forced some tenants, such as third-party logistic companies, to downsize operations. As a result, tenants are offering attractive sublease deals, including free or reduced rent.

But despite the rise in vacancy rates, high gas prices are keeping tenants from moving east to the Inland Empire. "The increase in fuel costs will help keep the South Bay strong as tenants will shy away from high (local trucking) costs to the Inland Empire," Bohannon said.

Asking rents for buildings in the South Bay area remained stagnant at 68 cents per square foot. Although rents didn't change, brokers said landlords are being challenged by the current market conditions and are willing to lease properties at lower rents.

"I think one year ago, the lessor and the sellers had the leverage," said Gary Blau, sales executive at the Goodglick Co. "Now the buyers and lessees have the leverage and the sellers know it."

Industrial Market At a Glance

Inventory: 219 million square feet

Under Construction: 1.31 million square feet

Asking Rents: 68 cents


MAIN EVENTS

- MS Kearny Northrop Avenue LLC, a partnership between Kearny Real Estate Co. and Morgan Stanley Real Estate, completed construction on a 21-building industrial complex in Hawthorne. The 203,000-square-foot project is adjacent to the Hawthorne Airport, and consists of buildings ranging in size from 5,700 to 20,700 square feet. The $45 million project is within Kearny's Century Business Center office and industrial campus, which formerly served as a manufacturing facility for Vought Aircraft Industries.

- Defense and technology company Northrop Grumman Corp. signed a lease for 321,800 square feet at 101 Continental Blvd. in El Segundo. The L.A.-based company signed the 10-year lease, with the right to terminate after three years, for $1.55 per square foot. The landlord is Barker Pacific Group Inc.

- Warehousing and transportation company DHL Exel Supply Chain signed a five-year lease for a 213,544-square-foot facility at 3015 Ana St. in Rancho Dominguez. Landlord First Industrial Realty leased the space for 62 months starting at 66 cents per square foot.

- Ohio-based Laufen International expanded its presence in the South Bay area and signed a 119,077-square-foot lease at 18420 Harmon Ave. in Carson. The brick and tile wholesaler leased the space from landlord Watson Land Co. for 60 months at 68 cents per square foot. Laufen's U.S. ceramic tiles division is already leasing an adjacent 148,908-square-foot space at 22010 S. Wilmington Ave.

For reprint and licensing requests for this article, CLICK HERE.