As 2014 came to an end, the San Gabriel Valley industrial market continued to profit from low vacancies and little availability, a one-two punch expected to place upward pressure on rental rates and sale prices throughout this year.
The vacancy rate of 2.9 percent in the quarter was down from 3.2 the previous period and from 4.4 percent a year ago, according to data from Jones Lang LaSalle Inc.
The numbers are welcome news for building and landowners, but are not so good for lessees and property hunters. And it’s a unique proposition for those who find themselves on both sides of the equation, like developer Craig Furniss.
Furniss, president of Seventh Street Development, expects rising land prices to impact his company’s future infill developments, while the same market conditions also promise brisk demand and quick sales for Seventh Street’s most recent project, Mission 71.
Seventh Street is deep into the fourth and final phase of Mission 71, a 91-acre, 2 million-square-foot project at a confluence of freeways in Pomona. Mission 71 West will add 500,000 square feet of industrial space in four buildings ranging from 70,000 to 200,000 square feet, and is slated for a summer completion. Furniss said that it’s already garnered a lot of interest.
“We have one building under contract, offers on two other buildings and we’re expecting more offers on a fourth,” he said. “There are essentially no new industrial products in these building sizes in San Gabriel Valley, so we’re the only option to purchase right now. We’d love to build more, but we’re having trouble finding land at a price that makes sense.”
The Mission 71 development is responsible for roughly one-third of the 1.8 million square feet of industrial construction set to come on line in the San Gabriel Valley. And, when coupled with the region’s vacancy rate, that construction activity bodes well for the mature market, said Nicole Welch, a JLL industrial investment services specialist.
“In a market like this, that went from a 4.4 to 2.9 percent vacancy, that’s a healthy change in availabilities,” said Welch, adding that without much available space, there are more tenants willing to renew, which bolsters the valley’s perpetually strong retention rate.
The office market remained strong in the fourth quarter as well, with slightly rising vacancies and asking rents. The market’s 1.5 million square feet of available office space represents a 14.1 percent vacancy rate, up from 12.6 percent the previous quarter. An additional 166,000 square feet is under construction, something that’s expected to have only a minor impact on asking rents, which have leveled at $2.17 a square foot, down a penny from the previous quarter, according to JLL data.
Much of the increased vacancy can be attributed to a single employer, said Linda Lee, senior managing director at Charles Dunn Co. Inc. In late 2014, Southern California Edison consolidated, laying off hundreds of employees at its Irwindale campus.
Still, she said, the market is poised for a turnaround.
“It’s still one of the most affordable submarkets in all of L.A. County. In the next quarter, we’ll see some positive absorption,” she predicted.
– Laurie L. Dove
City of Industry sold three parcels totaling 49 acres to Sun-Yin USA for $27 million. The buyer plans to complete a mixed-use development project, expected to fall in line with current zoning that includes 15 acres of commercial retail, eight acres of low-density housing and about 20 acres of high-density housing.
L.T. Global Investment Inc. paid $20.6 million for the five properties in South Hills Plaza on Azusa Avenue in West Covina. The 120,0000-square-foot property sits on nearly 10 acres and is 83 percent occupied.
Two properties totaling more than 142,000 square feet were included in an off-market, $360 million portfolio sale. The City of Industry industrial sites, at 15200 E. Don Julian Road and 370 S. Turnbull Canyon Road, were purchased by TriMas, an aerospace manufacturer.
The Lafayette Parc Apartments, a 259-unit apartment complex on 13 acres at 624 S. Glendora Ave. in West Covina, sold for $51.7 million. Purchaser Glendora Avenue Properties plans to invest an additional $2.5 million in adding a basketball court, theater, clubhouse, dog walk, swimming pool, soccer field and putting green.
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