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Saturday, Feb 4, 2023

Activity Way Up as Market Outpaces Much of County

Activity Way Up as Market Outpaces Much of County

San Gabriel Valley


Staff Reporter

The downturn in the San Gabriel Valley real estate market is turning out to be as shallow and brief as the national recession.

After sputtering during the first quarter, the valley’s 157.9 million-square-foot industrial market more than held its own last quarter, with a vacancy rate that remained steady at 3.8 percent as sales and leasing activity accelerated.

Meanwhile, the 9.3 million-square-foot office market saw its vacancy rate dip to 13.6 percent from 14.1 percent. The performance of both markets exceeded the county as a whole.

The reason according to brokers? Pent-up demand that had to be met.

“After 9/11 demand just disappeared almost entirely,” said Phil Lombardo, a senior vice president at Trammell Crow Co. “There were users that had expansion needs, but the general business climate was such that nobody was pulling the trigger on these deals.”

The trigger was pulled last quarter if gross sales and leasing activity in the industrial sector are any measure.

Activity fell in the first quarter some 20 percent, to 1.4 million square feet. Last quarter, it exploded to 3.1 million square feet, as asking rents remained steady at 42 cents a square foot.

The office market continued to give back space 32,500 square feet of it but less than the 98,000 square feet returned in the first quarter. Previously it was absorbing space.

Again leading the way in the industrial sector was Majestic Realty’s new Grand Crossing Business Center, near the intersection of the Pomona (60) and Orange (57) freeways. The 400-acre park will total more than 6.5 million square feet when totally developed.

The 1.1 million-square-foot first phase came on the market in the first quarter. After a strong response, the company is preparing for the 775,000 square foot second phase, which will consist of a 400,000-square-foot spec building and a 350,000-square-foot build-to-suit in which it has entered into negotiations, said Kent Valley, a senior vice president with Majestic.

“There is still a lot of demand,” said Valley. “Probably 60 percent of the (companies occupying) buildings we have service the Southern California region. And everyone still has to eat. They still buy furniture. A lot of people remodel homes.”

But with the uncertain economy, many companies are rolling over leases rather than moving, which is always expensive. And in the single biggest industrial deal of the quarter, the company actually downsized.

Moving to downsize

Steelcase Inc., the manufacturer of high-end office furniture, left a larger facility in Irvine and moved into 450,000 square feet in phase one of the Grand Crossing park in a 10-year deal. The company is paying an average of 30 cents triple net, which requires Steelcase to pick up maintenance, taxes and insurance.

In another significant deal at the business center, Synnex Information Technologies Inc., based in Fremont, Calif., took 70,000 square feet in the first phase for five years at 42 cents triple net.

Elsewhere in the valley, there were two significant deals at the 432,000-square-foot Azusa Industrial Center, which was built in the late 1980s and had been occupied by Best Buy Co. Inc. as a service center before it vacated the space. It is owned by SSR Realty Advisors, a pension fund adviser.

Blue Ribbon Baking, a growing commercial bakery that services schools and other large institutional accounts, moved from Irwindale to an 86,500-square-foot space at Azusa center. It signed a 10-year lease at 38 cents triple net.

Wedgestone Automotive Corp., a manufacturer of heavy-duty bumpers for SUVs, also is doing well. Wedgestone, which moved its warehousing out of its Irwindale headquarters to have more manufacturing space, took 74,000-square-feet at the Azusa center for five years at 39 cents triple net.

“If user demand stays solid we will definitely have tightening conditions by the fourth quarter and even an opportunity to raise rates,” predicted Lombardo, who represented SSR Realty in both Azusa center deals.

San Gabriel Valley

Major Events:

– Steelcase Inc. and Synnex Information Technologies Inc. took a combined 520,000 square feet of space in Majestic Realty’s Grand Crossing Business Center, the newest and largest industrial park in the Valley.

-Blue Ribbon Baking and Wedgestone Automotive Corp took a combined 160,000 square feet of space at the Azusa Industrial Center, which had been occupied by Best Buy before it vacated the space.

– Trammell Crow Co. leased out the remaining space in the first phase of its Irwindale Business Center, a 2.1 million-square-foot light industrial park, to Turbo Wholesale Tires, a distributor of high-performance passenger car tires that moved from Glendale.

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