The South Bay industrial market had a robust first quarter, fed by continuing improvement in the general economy. As a result, rents increased in both the office and industrial markets.

At 21.4 percent, the first quarter office vacancy rate was a half-point lower than the prior period and nearly a full point below the same quarter last year, according to data from Jones Lang LaSalle Inc. The average asking rent came in at $2.39, 8 cents higher than the fourth quarter of 2013.

“This is the first time in the cycle in the South Bay where I’ve seen in general that rents are substantially higher,” said Steve Solomon, managing director at Jones Lang LaSalle. “When you look at the whole market, it’s about a 4 percent increase in rates from $2.31 to $2.39. That means a lot.”

Rents in the office market had been relatively flat last year despite strong demand, he said. But with renovations of older properties coming on line, asking rents are expected to creep up further.

While the Long Beach suburban area had the biggest net absorption because of a 200,000-square-foot renewal deal by Scan Health Plan, the South Bay office market continued to be led by strong demand in El Segundo, where companies continued to move in.

“South Bay is feeling a direct impact as the economy improves,” said Solomon.

Tech and service companies have been moving to the area, while the consolidation of aerospace companies appears to have plateaued.

On the industrial front, the first quarter vacancy rate was 5.4 percent, a full point lower than the prior period. Asking rents, at 60 cents, were 2 cents higher than the prior quarter and 4 cents above the year-ago period.

Leasing activity paced the office market as investment sales as well as owner-occupier deals lagged due to limited inventory, said Luke Staubitz, an executive vice president at Jones Lang LaSalle.

“Sale prices remain close to or at all-time highs,” he said, “and the expectation is that unless interest rates go up, or there is a general decline in the overall economy, sale prices are expected to remain stable or even perhaps increase slightly from where they are now.”

Two of the largest investment purchases came in the multifamily market just after the first of the year. In the larger of the two, Equity Residential bought Pacific Place Apartments, at 5211 Pacific Concourse Drive, for $143 million from Cornerstone Real Estate Advisors Inc. In Torrance, M West Holdings bought Milano Apartments from Fairfield Residential for $60.8 million.

Staubitz attributed the sense of an overall positive market to broader economic improvement. Though port activity slowed due to the Chinese New Year celebration, he expected it to rebound in March.

“In the South Bay, We continue to see growth in logistics, garment, electronics and light manufacturing, such as satellite technology and aerospace,” he said.

Main Events

Griffin Capital Essential Asset REIT Inc. bought BT Infonet, a Class A office building at 2160 E. Grand Ave. in El Segundo, for $52.7 million from GLL Real Estate Partners Inc. in February.

Equity Residential bought Pacific Place Apartments, at 5211 Pacific Concourse Drive, for $143 million from Cornerstone Real Estate Advisors Inc. in January.

M West Holdings bought Milano Apartments in Torrance from Fairfield Residential for $60.8 million in January.

Evolution Hospitality paid $33.1 million for the 215-room Doubletree Hotel near Los Angeles International Airport in February. The seller was StoneCreek Properties.

Westland Realty bought three retail properties at 28500 S. Western Ave. from Tridiamond for $14.8 million in March.

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