By Lou Moreno
The mid-counties industrial market strategically straddles Los Angeles and Orange counties.
The cities within Orange County are Buena Park, Cypress, La Palma, Los Alamitos and Seal Beach, in descending order by the size of their industrial bases.
The cities within Los Angeles County are Santa Fe Springs, Cerritos, La Mirada, Paramount, Downey, Whittier, Norwalk, Lakewood, Bellflower and Artesia.
The area is the epicenter of Southern California. This central location has provided insulation from the chilling effects of the economic downturn. But, as you may imagine, no market is completely insulated from the recession.
This explains the downturn in leasing and sales activity seen in the mid-counties area throughout 2008.
By year’s end, gross activity totaled 4.2 million square feet, a 41% decline from 2007. This level of gross activity was the lowest since 1991.
In the fourth quarter, gross activity totaled 1 million square feet, down 6.5% from the third quarter and down 51% from a year earlier.
Net absorption, while still negative, was at its most favorable level for the year.
Another glimmer of hope in the fourth quarter was an increase in the number of larger leases. Exemplis Corp. entered into a six-year sublease of 218,640 square feet in Buena Park to consolidate a 73,000-square-foot warehouse in La Mirada and an 85,000-square-foot manufacturing facility in Garden Grove.
Cargo company Hawaiian Express Service Inc. expanded from a 68,000-square-foot warehouse in La Mirada to a 130,459-square-foot building in La Mirada.
LA Records expanded its operations with a long-term lease of 127,725 square feet in La Mirada.
At the end of the fourth quarter, the overall availability rate stood at 5.6%. The actual vacancy rate was 2.8%.
Despite the limited supply, anxious owners and sublessors are getting aggressive. In the past year, average asking lease rates decreased 4.5% to 63 cents a square foot a month. Sale prices have dropped at a steeper rate, down 14% from $127 per square foot for buildings larger than 10,000 square feet.
Concessions are prevalent with initial free rent, tenant improvements and broker bonuses all part of recent leases. Price reductions and incentives likely are to continue.
Moreno is an associate in Anaheim office of CB Richard Ellis Group Inc.
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