Pent-up demand from manufacturing and distribution companies drove sales in the San Gabriel Valley industrial market in the fourth quarter, but the area saw little leasing activity. The market ended 2012 with just over half the volume of sales and leasing, on a square-foot basis, it achieved in the same period a year earlier, when manufacturing recovery from the Japanese tsunami was fueling a boom.
“Buyers are having trouble finding product, and they sense the market bottomed out midyear or in the third quarter,” said Jim Center, senior vice president at Newmark Grubb Knight Frank in the City of Industry. “Plus, they are looking at some new construction prices and getting sticker shock.”
The market is driven by Asian immigrant business owners who have done reasonably well and built up equity over the past decade, Center said. “They take a long-term view and want to make investments in U.S. real estate that they can fall back on, if at some point they sell or shut down their companies.”
Both rental and vacancy rates held steady at the end of 2012. Average asking rents were 42 cents in the fourth quarter, constant from the prior period, and the 5.4 percent vacancy rate was just one-tenth of a percent lower that the level recorded for the third quarter, according to Jones Lang LaSalle Inc. Both figures were flat from the year-earlier quarter.
With no construction ongoing in the San Gabriel Valley and the market for large, Class A industrial space tight, companies are continuing to be edged east into Chino and San Bernardino, said Tony T. Phu, executive vice president at Colliers International.
“There have not been a lot of buildings on the market and there are more buyers than sellers,” he said. “The majority of San Gabriel Valley users would like to stay in the San Gabriel Valley, so that means they are renewing their leases, even though the majority of tenants would prefer to own if they were given a choice.”
While the potential for tax increases might have driven year-end sales in other markets, it was not a big motivator in fourth quarter activity in the San Gabriel Valley, Center said.
“We didn’t see a whole lot of investment sales taking place and if taxes were really a concern to investors, they would have sold,” he said.
Local landlords might feel more comfortable raising sale prices and lease rates in the near future, he said. “It’s not great if you’re a tenant or a buyer, but it will force people to take a hard look at not putting off decision-making much longer.”
– Karen E. Klein
Sun Hing Foods, an ethnic food wholesaler and distributor based in South San Francisco, purchased a 216,506-square-foot warehouse at 14505 E. Proctor Ave. in the City of Industry for $16.2 million, or $74.82 per square foot. The company had outgrown its 50,000-square-foot space on East Valley Boulevard. Its new building, built in 1969, was the former headquarters of Pactiv, which made Hefty brand packaging. After Pactiv was acquired by Reynolds Packaging Group in late 2010 and moved its operation to Illinois, a local investor group purchased and renovated the property.
A 10-year lease for a 325,000-square-foot, Class A property at 318 Brea Canyon Road in the City of Industry was the quarter’s only significant lease. The tenant, East Lion Corp., distributes women’s shoes. The deal, reportedly for 41 cents per square foot, is an expansion and consolidation of the company’s local footprint. The tenant plans to build out 35,000 square feet for office space to be used as its corporate headquarters. Hill’s Pet Nutrition, maker of Science Diet and other pet foods, was the previous tenant.
A Class B distribution center at 111 Baldwin Park Blvd. in the City of Industry sold for $7.5 million, or $65.29 per square foot, to 2000 Gold LP, an import firm that relocated from Monterey Park. The 114,570-square-foot property was sold by HICO Spring Air LLC.
The Pomona Business Park at 3400-3441 Pomona Blvd. sold for $16.9 million, or $80 per square foot, to a Denver real estate investment trust. The 9.39-acre property houses four warehouse distribution buildings that are fully leased. The seller was Metropolitan Life Insurance Co.
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