The vacancy rate was up nearly one point in the San Gabriel Valley’s industrial market. But if not for one major move, it would have been up by just a fraction of that.
Wholesaler Four Seasons General Merchandise left a 613,000-square-foot warehouse in City of Industry, raising the region’s vacancy rate by a half-point on its own.
But a new tenant has already signed a lease for the building. So while the numbers look bad, brokers are upbeat, saying they’re leasing space and seeing strong interest in building sales.
“There’s definitely been an increase in the number of transactions,” said Jim Center, a Grubb & Ellis Co. senior vice president in the City of Industry. “The second quarter was just almost dead.”
The second quarter saw less than 2 million square feet of sales and lease activity, while third quarter activity climbed to 3.3 million square feet.
Center said supply-chain disruptions stemming from last spring’s earthquake in Japan hurt the market in the first half of the year, but companies with lots of Japanese imports were getting back to full strength and leasing more space.
Still, there hasn’t been enough interest for landlords to start raising rents.
Dennis Keane, a senior associate with Lee & Associates based in the City of Industry, said rents are flat and that landlords have been offering lots of incentives to keep tenants where they are.
Better than the leasing market, though, is the sales market, which is starting to heat up, he said.
“There’s a lot of money at the top with these big investment companies,” Keane said. “They’ve got $100 million, $200 million to spend and they’re snooping around the San Gabriel Valley market looking for deals.”
Center said the interest isn’t just from investors. Small local companies are seeing good long-term value in buying. That demand mixed with a small inventory of sale properties is slowly driving up prices, which are still relatively low.
“Every comp is higher than the last, but the numbers aren’t climbing rapidly,” Keane said. “If one sells for $90 (a square foot), the next might be $90.50. It’s certainly encouraging and it does appear that the worst is behind us, but it also shows it’s going to be a long, very gradual recovery.”
- In the largest deal of the quarter, fashion label Michael Kors leased a 613,000-square-foot warehouse at 3777 Workman Mill Road in City of Industry that was recently vacated by wholesaler Four Seasons General Merchandise. The 10-year lease, worth about $30 million, will let the company consolidate and expand its warehousing and distribution operations, which were spread across three South Bay facilities.
- Razor USA vacated about 400,000 square feet in a 752,000-square-foot building in Pomona at the end of the third quarter. The property, located at 1601 W. Mission Blvd. in the Mission-71 business park, is the largest free-standing space available in Los Angeles County.
- Menlo Equities LLC, a Palo Alto commercial real estate investor, bought two Diamond Bar office buildings for $19.4 million. The buildings, at 1550 Valley Vista and 21950 Copley Drive in the Gateway Corporate Center, have a combined 112,000 square feet and are fully leased by Goodrich Corp. and Allstate Insurance. Behringer Harvard Real Estate Investment Trust was the seller.
- Phone accessory distributor Superior Communications renewed its lease for a set of Irwindale buildings for 10 years, a deal valued at $12 million. Superior leases 227,000 square feet in three neighboring buildings, the largest at 5082 Fourth St. in the Irwindale Business Park, owned by Clarion Partners.
- Furniture distributor Coaster Inc. signed a five-year lease renewal for its 500,000-square-foot warehouse and distribution center at 20300 E. Business Parkway in the City of Industry. The deal with landlord Majestic Realty was valued at roughly $12 million.