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Wednesday, Aug 10, 2022

Weakening Economy Saps Strength From Industrial Stronghold

The San Gabriel Valley’s industrial market absorbed more than 1 million square feet of space in the final quarter of last year and the first of this year as businesses prepared to meet the demands of an improving economy.

But the second quarter saw a much slower market, one that gave back 21,000 square feet as tenants mostly stayed put and buyers couldn’t find much for sale, according to figures from Jones Lang LaSalle Inc.

“We started off with a really strong first quarter and then the second quarter we probably dropped down in our activity probably 30 or 40 percent,” said Kent Valley, a senior vice president with Majestic Realty Co., the San Gabriel Valley’s largest industrial landlord.

Sales and leasing activity dropped by more than one-third to about 2.1 million square feet; the region’s vacancy rate rose by more than a point to 6.2 percent.

Tony Phu, an executive vice president with Colliers International in Ontario, said he believes there’s still demand in the valley from tenants looking for big buildings and from buyers, but the demand isn’t matching up with what’s available.

“There aren’t a lot of buildings for sale. And in terms of the big boxes, inventory is low,” Phu said.

He pointed to the second quarter sale of a 50-year-old, 108,000-square-foot Class C building for $7.4 million. “That’s an older property and it sold,” he said. “I think it’s a sign. There’s a demand for buildings.”

Thanks to that demand, he said, rents and asking prices are holding steady and tenants are getting fewer concessions from landlords. Asking rents in the San Gabriel Valley rose by a penny to 43 cents per square foot.

Jim Center, a senior vice president with brokerage Newmark Grubb Knight Frank in the City of Industry, agreed the quarter was slow in part to a lack of inventory. But he added that companies are taking a cautious approach about the economy in advance of November’s presidential election.

“I think the summer’s going to be kind of slow, too,” he said. “A lot of people are waiting on the elections, and it remains to be seen if there’s going to be (an economic) pickup here in California.”

Still, there were some large lease deals, including two at Majestic Realty’s Grand Crossing Business Park, where both Malibu toy manufacturer Jakks Pacific Inc. and Kelly Paper, a unit of Australian distributor PaperlinX, renewed leases.

– James Rufus Koren

Main Events

In the largest local lease deal of the quarter, Malibu toy manufacturer Jakks Pacific Inc. renewed its least with Majestic Realty on an 800,000-square-foot distribution center at 21749 Baker Parkway in City of Industry. Financial terms of the five-year deal were not disclosed. The distribution center is part of Majestic’s 6 million-square-foot Grand Crossing Business Park.

Also in Grand Crossing, Kelly Paper, a unit of Australian distributor PaperlinX, renewed its lease on an 180,000-square-foot distribution center at 218 Brea Canyon Road. The company has been a tenant since 2002. Financial terms of the lease, which will start Oct. 1, were not disclosed.

Ajozan LLC, a small manufacturing company, bought a 108,000-square-foot light-industrial building at 13170 Temple Ave. in City of Industry for $7.4 million. The seller was Franckhop Holdings LLC.

Manufacturer Roadster Wheels Inc., a maker of wheels for classic and collectible cars, leased two buildings with a combined 72,000 square feet at 14955 Don Julian Road, City of Industry. The five-year lease, valued at $1.8 million, will let the company consolidate manufacturing and distribution operations in Santa Fe Springs and Bakersfield. The landlord is the Lim Family Trust.

Office supply distributor Bangkit USA Inc. bought a 195,000-square-foot warehouse at 10511 Valley Blvd. in El Monte. The Vernon company repackages and distributes office supplies sold at drugstores, college bookstores and other retail outlets. The company purchased the building for $15.2 million from investor El Monte Valley Partnership.


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