The South Bay industrial real estate market had big fourth quarters in each of the past two years – with a difference.

An optimistic feeling at the end of 2010 turned to uncertainty because of a sluggish economy, while this year a growing economy boosted that optimism in the first quarter.

Buyers and tenants absorbed 282,000 square feet of space, lowering the vacancy rate nearly a half-point to 5.4 percent – the first time it’s been that low since late 2009, according to figures provided by Jones Lang LaSalle Inc.

“We came out of the gates pretty hot in January,” said Barry Hill, a senior vice president at Jones Lang LaSalle.

That meant companies leasing space in relatively inexpensive Class B industrial buildings in the fourth quarter felt confident enough to justify more expensive Class A in the first quarter.

Though asking rents are holding steady at 57 cents, Jim Biondi, a senior vice president with Grubb & Ellis Co., said the tighter market has led developers to start construction on more than 500,000 square feet of mostly speculative space.

“That’s a lot of square footage coming online,” said Biondi said. “That’s a good sign.”

Irvine developer Sares-Regis Group broke ground on 264,000 square feet near the Long Beach Airport, with plans to start construction on an additional 400,000 square feet later this year.

Seal Beach company Xebec Realty Partners started construction of 438,000 square feet at the former Ball Corp. plant in Torrance, which Xebec purchased in December after the company moved its glass manufacturing elsewhere.

The neighboring Mid-Cities is similarly tight and several new buildings are planned, but Grubb & Ellis’ Chuck Berger said the appetite for speculative development isn’t as great.

“The middle of last year is when we started seeing the proposed build-to-suit or spec plans,” he said. “But right now there’s no one moving forward on spec development. I imagine that will change within the next year or so.”

In the meantime, there was plenty of activity, with 4.2 million square feet of space sold or leased. The Mid-Cities vacancy rate fell a half-point to 5.5 percent.

Oddly, all the activity came despite stagnant cargo volumes at the San Pedro Bay port complex. Typically, cargo growth drives demand in the markets as companies look for warehouses and distribution centers for imported Asian goods.

“It’s an interesting dynamic,” Hill said. “But my expectation is that port volumes will improve slightly and that will help the market maintain its current pace.”


  • Sares-Regis Group of Irvine broke ground in February on a four-building, 264,200 square foot industrial project on former Boeing Co. land at the Long Beach Airport. Construction should be complete by early autumn. The buildings are the first phase of a nearly 670,000-square-foot, $95 million industrial park called Pacific Pointe. Construction on the second phase is expected to begin in the second quarter.

  • SimpleHuman LLC, a Torrance company that sells designer trash cans and kitchen gadgets, leased a 219,575-square-foot Class B building at 415-501 W. Walnut St. in Compton. Prologis Inc. owns the building. The 66-month deal, with five months of free rent, is worth about $7 million, at 53 cents gross per square foot.

  • Another home furnishings company, pillow and bedding maker Hollander Home Fashions of Boca Raton, Fla., leased the Class B building next door to SimpleHuman at 601 W. Walnut. Hollander took the entire 200,000-square-foot building, also owned by Prologis, in an 11-year deal worth about $11.7 million.

  • Irvine logistics company 3PL Global LLC leased 270,764 square feet at 2211 E. Carson St. in Carson. The Class A building was built last year. The six-year deal with Prologis is worth about $11 million.

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