Vacancy rates in the South Bay industrial market reached historically low levels as port activity improved in the second quarter. At 5.1 percent vacancy, the industrial market is very tight. The same cannot be said for the office market, however, where vacancies are above 22 percent, the highest in the region.

Luke Staubitz, executive vice president at Jones Lang LaSalle Inc., said the tight industrial market was directly correlated to rising import activity at the ports of Long Beach and Los Angeles.

“The driver behind the higher import side is improving consumer confidence and improving automobile and housing industries,” he said.

At 5.1 percent, second quarter industrial vacancies were a half-point lower than the prior quarter and well down from the 5.9 percent posted in the year-earlier period, according to data from Jones Lang LaSalle. Sales and leasing activity skyrocketed, with 3.3 million square feet of deals made – nearly 240 percent above the 1.4 million square feet in deals made the prior quarter and 140 percent more than a year earlier.

The highlight of the quarter – and a deal that accounted for a full one-third of the activity in the period, was the 1.1 million-square-foot lease signed by Mercedes-Benz USA LLC with Sares-Regis Group for the former Boeing facility on 54 acres on Conant Street in Lakewood. Terms of the 15-year lease were not disclosed, but at the going rate of 50 cents a foot, it could be worth as much as $6.5 million.

Staubitz said he expected vacancy rates to continue to trend downward through the year, especially for Class A buildings, if there was no significant shift in monetary policy and interest rates remain low.

On the office front, the second quarter vacancy rates increased to 22.3 percent from 20.8 percent in the year-earlier period and asking rents increased 1 cent a square foot from $2.27 in the same period last year.

“The sale market is recovering nicely and doing better than expected,” said Steve Solomon, managing director at Jones Lang LaSalle. “But the leasing market is still flat, with the exception of El Segundo.”

Despite the relatively negative data, he has seen a lot of demand for new buildings, especially from smaller or medium companies, which is a sign of improved outlook for growth.

“There are developers building office buildings in the market again and that hasn’t happened in several years,” he said.

– Kay Chinn

Main Events

Mercedes-Benz USA LLC signed a 15-year lease with Sares-Regis Group, taking more than 1 million square feet at a former aircraft facility in Lakewood.

Damco Distribution Services Inc. leased a 258,000-square-foot building in Carson with eight acres of additional land.

Door to Door Storage Inc. leased a 71,000-square-foot Class A building in Carson from Watson Land Co.

Angelo Gordon & Co. bought three Class A buildings for more than $157 million in June from Molina Healthcare Inc. The aggregate size of the properties is 622,861 square feet, and much of the space will be leased by Molina.

Los Angeles World Airports bought two buildings and a parking lot at 6033 and 6053 W. Century Blvd. in Los Angeles for $110 million from Equity Office Management LLC.