Industrial activity continued to recover in the San Gabriel Valley, home to many Asian import firms that have their fortunes tied to the recovery of the U.S. economy.
The valley absorbed 361,741 square feet of industrial space during the first quarter, driving down the vacancy rate one-tenth of a point to 3.5 percent, according to Grubb & Ellis Co.
It was the fifth straight quarter of declining vacancies; the rate was 4.1 percent a year ago. Tight supply pushed the average lease rate up to 44 cents, 3 cents higher than at the end of last year.
Brokerage Colliers International predicted that the valley’s economy would continue to improve this year and fuel a strong comeback for real estate.
“As industrial demand returns and the vacancy rate continues to decline, landlords will begin to raise asking rental rates,” the brokerage stated in a recent report.
Large transactions underpinned the lease market, but small deals were the norm in building sales. With property prices at their lowest in years, many industrial and logistics companies can afford to buy facilities, according to the report. Most of the sales are in the $1 million-$3 million range with little or no debt financing.
“In contrast with the previous quarter, where the majority of sales were investment deals, the amount of smaller owner-user deals has been on the rise this quarter,” the report stated.
The vacancy rate for office space was 9.8 percent, the lowest of any Los Angeles County market. The valley traditionally has a low office vacancy rate given there has been little new construction.
Matt Perrigue, vice president at Jones Lang LaSalle, said there was an increase in leasing deals during the quarter, but many were renewals with the tenants asking for less space. Building owners were stuck with small chucks of space in buildings that can’t be rented and essentially became concessions to keep the tenant.
“Landlords would rather take back the space than lose the tenant completely and have a vacant building,” Perrigue said.
All types of construction remained at a standstill, though three projects are in the planning stages. Perrigue said none will get the green light until developers and lenders see lease rates rise due to sustained demand.
For example, Majestic Realty Co. wants to add 206,000 square feet of office and industrial space to its Crossroads Business Park in City of Industry, but strong tenant demand has not substantiated it at this point, Perrigue said.
- Hot Services, a trucking and storage company, moved into 156,000 square feet at 14255 Lomitas Ave. in the City of Industry. The five-year lease was valued at approximately $3 million. The landlord is Lomitas LP.
- Vertis Communications renewed a lease for 145,000 square feet of office and industrial space at 3200 Pomona Blvd. in Pomona with landlord TA Associates Realty. The three-year pact has a total value of $1.9 million. Vertis, a Baltimore-based company that produces newspaper inserts and direct-mail advertising, filed for Chapter 11 bankruptcy in November.
- Vertis Communications also sold a 22,000-square-foot office building in Glendora to an undisclosed buyer for $2.2 million. The building is at 511 W. Citrus Edge St.
- Loopnet, a San Francisco-based provider of real estate information, leased 38,600 square feet of office space at 2100 E. Alosta St. in Glendora. Financial terms were not disclosed. The building is owned by Americas Christian Credit Union.
- Mega Toys purchased a 51,000-square-foot industrial building at 809 W. Santa Anita St. in San Gabriel for $3.4 million. The seller was Yocum Business Furnishings. Mega Toys, based in downtown Los Angeles, plans to use the building for manufacturing.
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