Major events in Los Angeles County commercial and industrial submarkets in the second quarter.

Economic jitters and the Japanese disasters struck the San Gabriel Valley in the second quarter – where they had the effect of quieting the largely industrial market.

Sales and leasing dropped by one-third to 1.18 million square feet as cautious business owners held back in making major decisions as the recovery sputtered.

“I think last year we had companies rebuilding inventory. My suspicions are that inventory has been rebuilt and now they are waiting to see if demand is going to pick up,” said Jim Center, a senior vice president with Grubb & Ellis Co.

And in a valley where many businesses are trade related, not helping was a disruption in the supply chain caused by the March earthquake and tsunami in Japan, he said.

The slowdown was reflected in the net absorption rate. The market gave back 114,759 square feet, though it wasn’t enough to raise the vacancy rate, which remained at 3.5 percent, according to Grubb & Ellis. However, it’s the first time the valley’s vacancy rate hasn’t fallen since the fourth quarter of 2009.

Rents in the region continue to be low, though they climbed to 46 cents from 44 cents in the first quarter. Center said the small increase is likely a distortion that resulted from little activity.

“The fewer transactions you have, the easier it is to skew the numbers upwards or downwards,” he said.

Dennis Keane, a senior associate with Lee & Associates, said landlords are keeping rents steady and offering concessions to keep tenants in place. “Landlords with an existing tenant and a lease expiring, they will bend over backward to keep that tenant. Nobody wants vacancy,” he said.

The building sales market also calmed after a flurry of sales over the past 12 months, even as demand remained strong for good product.

“Enough buildings have traded over the past few quarters that it’s sucked up a large amount of supply. Now, you go on a tour of four buildings with a guy and three are off the market,” Keane said.

“If you don’t have to sell right now, why would you? Prices are climbing, but there not taking a sharp turn upwards. Owners think their properties are still worth X, when in fact they’re worth Y,” he said.

MAIN EVENTS

  • JP Original Corp., the maker of women’s shoe brands Anne Michelle and Bamboo, bought a 131,000-square-foot warehouse from Unilever in the City of Industry for $9 million. The 19161 E. Walnut Drive North warehouse is next to its existing facility and will allow the shoemaker to consolidate several smaller warehouses it had leased throughout the city over the past year and a half. The building had been on the market for about a year.
  • The U.S. Marshals Service is taking over two Monterey Park buildings for a regional headquarters and training facility. The federal General Services Administration in April signed a 10-year lease valued at $20 million for 1938 and 1968 Saturn St. The buildings, with a combined 44,000 square feet, will become headquarters of the Pacific Southwest Regional Fugitive Taskforce, which includes local, state and federal law enforcement agencies in California and Nevada. The lease will allow the Marshals Service to consolidate several offices, including one on the second floor of the Los Angeles Federal Building.
  • Outdoor gear manufacturer Exxel Outdoors in April purchased a 156,000-square-foot warehouse complex at 341-345 N. Baldwin Park Blvd. in the City of Industry for $8.2 million. The facility will house the company’s western distribution center, as well as corporate offices, design studios and a showroom. Exxel is moving to Industry from a smaller leased facility in Irwindale. Exxel makes sleeping bags, tents and other outdoor equipment.

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