Buying and Leasing Rates Slow While Industrial Vacancies Rise
By ANDY FIXMER
Buying and leasing activity slowed during the third quarter in the mostly industrial Mid-Cities market, while the area’s vacancy rate shot up.
“In general, the leasing market is somewhat stagnant,” said Jim McFadden, a senior vice president with Grubb & Ellis Co. “There is just no urgency in the leasing market.”
Buying and leasing activity fell to 1.4 million square feet in the July-September period, down from 1.7 million in the prior three months and 2.2 million in the third quarter of 2002, according to Grubb & Ellis. The deals that were inked tended to be for buildings mainly between 10,000 and 40,000 square feet in size considered small for the Mid-Cities region.
Asking rents held steady: 51 cents a square foot in the third quarter, compared with 52 cents for the previous three months and 50 cents for the like period a year earlier.
“We don’t see many larger corporations making commitments for leases or purchases at this time,” said John Biven, a CB Richard Ellis senior vice president. “The smaller entrepreneurs are doing most of the deals. A lot of the corporations are trying to minimize their capital exposure, and one way to do that is by just staying put.”
Because of several industrial parks coming on line during the third quarter, the industrial vacancy rate jumped to 4.5 percent, from 2.8 percent in the previous quarter but remained lower than the 5.1 percent registered in the year-ago period.
Proficiency Capital Corp.’s Heritage Crossing Industrial Park in Santa Fe Springs on the corner of Santa Fe Springs and Telegraph roads alone added 450,000 square feet during the third quarter.
With nearly 1.3 million square feet of new industrial buildings under construction, the vacancy rate may jump even higher next quarter.
The availability rate the amount of space on the market for sub-lease or currently occupied but going vacant within a month, along with those buildings under construction is at 7.4 percent, the highest since 1994, said Rick McGeagh, a senior vice president with CB Richard Ellis.
In the largest lease deal of the quarter, Santa Fe Springs-based Weber Distribution took 180,969 square feet of warehouse space at 16501 Trojan Way in La Mirada from developer MC & C;/Fortis Life.
McGeagh, who along with senior vice president Steve Batcheller represented MC & C;/Fortis, wouldn’t disclose rents but other brokers valued the 10-year lease at nearly $12 million.
The next largest lease was made by Acapulco Acquisition Corp. to store and distribute goods for its Acapulco restaurants. The 10-year deal is for 67,290 square feet at 7150 Village Drive in Buena Park a property owned by the Teachers Insurance and Annuity Association College Retirement Equities Fund and is valued at $4.1 million.
In the largest sale of the quarter, fabric distributor Landmark Corp. bought a new 25,450-square-foot warehouse in the Heritage Crossing Industrial Park. Sam Chu, the CB Richard Ellis senior associate who represented Landmark Corp., wouldn’t disclose the sale price but other brokers pegged it at $2.2 million for just the shell. Landmark will have to install offices and the electrical system.
Chu said buyers are looking for small warehouses with 20,000 square feet or less, but developers continue to concentrate on larger projects with more than 65,000 square feet.
The remaining six buildings at Heritage Crossing have attracted interest but so far none are under contract, according to Chu.
Still, McGeagh noted that the market is showing signs of life, citing a number of deals close to being signed that will likely push up fourth quarter activity. As for the market’s limited office activity, the only large deal of the quarter involved Transpacific Development Corp. signing a lease with Korean trading company LG International (America) Inc. for 19,000 square feet for 10 years at the nine-month-old Cerritos Towne Center at 17777 Center Court Drive. That deal is valued at about $5 million.
-Weber Distribution leased 180,969 square feet of warehouse space at 16501 Trojan Way in La Mirada from developer MC & C;/Fortis Life in a deal valued at $12 million.
-Acapulco Acquisition Corp. signed a 10-year deal for 67,290 square foot warehouse at 7150 Village Drive in Buena Park valued at $4.1 million.
-Landmark Corp. bought the shell of a new 25,450 warehouse in the Heritage Crossing Industrial Park in Santa Fe Springs from Proficiency Capital for $2.2 million.
– Transpacific Development Corp. signed a lease with Korean trading company LG International (America) Inc. for 19,000 square feet at the Cerritos Towne Center for about $5 million.