Deep-discount retailer 99 Cents Only Stores Inc. has signed a mammoth lease for 615,000 square feet in the City of Commerce – the largest industrial infill lease ever signed in Los Angeles County.
The company signed last month for the entirety of the Garfield Corporate Center, an expansive Class A industrial development still under construction at 6100 Garfield Ave. It’s expected to be completed in about a month. Landlord KTR Capital Partners, a private equity firm out of New York, began speculative construction early last year on what is expected to serve as a state-of-the-art distribution center for 99 Cents Only.
Brokers Barry Hill, Paul Sablock, Tim O’Rourke, Mike Fowler and Zac Sakowski of Jones Lang LaSalle Inc. represented the landlord in the deal.
Hill declined to disclose terms of the transaction, but said the going rate for modern Class A industrial space from the South Bay to the Central Cities of Commerce and Vernon was in the range of 55 to 65 cents a square foot a month. At an average rate of 60 cents a square foot, a 10 year lease for 615,000 square feet would be valued at nearly $44.3 million.
“Los Angeles has one of the most expensive industrial markets in the United States,” Hill said. “It’s a function of the fact that the Port of Long Beach and the Port of Los Angeles combined represent some 40 percent of inbound container freight for the United States.”
The Garfield facility, the largest free-standing industrial building constructed in greater Los Angeles in the last decade, is located about half a mile from entrances to the 5 Freeway and about a mile from the 710 Freeway. It’s also about five miles from 99 Cents Only’s headquarters at 4000 Union Pacific Ave. It is unclear whether the company will continue to occupy any portion of that 880,000-square-foot building, which was constructed in 1950.
Company representatives declined to comment.
Kevin Apel, vice president at KTR, said the building’s proximity to the ports, rail yards and Los Angeles International Airport was a major factor in deciding to begin construction before locking down a tenant.
Hill said the fact that KTR was able to fully lease Garfield Corporate Center was a testament to the design and efficiency of the building. It’s also on trend with a growing number of industrial tenants looking to leave behind outdated, functionally obsolete facilities.
“There’s been a flight to quality as companies look at their supply chains and every facet of the process,” he said. “They’re looking to become more efficient in every way possible, so occupying more operationally efficient real estate is definitely a step in the right direction.”
There’s reason to believe that 99 Cents Only, acquired and taken private by L.A. private equity firm Ares Management in 2011, is looking to improve efficiency. In a statement last fall after the company laid off 160 workers, the deep-discount retailer said it would do whatever is necessary to “streamline our operations in order to keep costs in line with our competitors, better control sourcing of our merchandise and execute on our strategy to grow our store numbers significantly over the next few years.” As of October, the chain had 332 stores, with 238 of them in California, 44 in Texas, 33 in Arizona and 17 in Nevada.
Downtown L.A. commercial real estate company CBRE Group Inc. has named Eric Hasserjian managing director of asset services for the greater Los Angeles area. He will oversee more than 35 million square feet of office, industrial and retail space that the company has under management in the area. Hasserjian joined CBRE from the L.A. office of Newmark Grubb Knight Frank, where he led the firm’s landlord representation business as a senior managing director. … Montana Avenue Capital Partners, a real estate investment and management firm in Santa Monica, has named Steven Elson vice president. He will focus on the acquisition of value-add commercial real estate in Southern California and manage the firm’s portfolio. Elson joined Montana from Santa Monica firm Luzzatto Co., where he was director of asset management and acquisitions.
Staff reporter Bethany Firnhaber can be reached at email@example.com or (323) 549-5225, ext. 235.
For reprint and licensing requests for this article, CLICK HERE.