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Mid-Counties Industrial Activity Maintains Momentum in Q3

Continued strong industrial user demand was evident across all size ranges in the Mid-Counties area in the third quarter, reinforcing signs of optimism.

There was nearly 2.7 million square feet of gross industrial activity, a 15.3% increase compared to the third quarter of 2012, with 10 user transactions of more than 100,000 square feet.

The last time there was similar volume in large transactions was eight years ago in the third quarter of 2005, when there were nine such transactions.

The market is becoming more constrained, and asking lease rates are increasing, with class A space leading the way.

Similarly, limited supply in building for sale and a void in for-sale speculative development continues to put upward pressure on asking sale prices.

Mid-Counties’ Features

Mid-Counties is central to the five-county Southern California area and yet outside the congestion of the downtown Los Angeles core. Its excellent labor pool; modern, functional industrial base; and clean, safe environment all continue to make the market an excellent choice of many industrial users. The approximately 132-million-square-foot market encompasses Santa Fe Springs, Artesia, Bellflower, Buena Park, Cerritos, Cypress, Downey, La Mirada, La Palma, Lakewood, Los Alamitos, Norwalk, Paramount and Whittier.

Industrial user demand is improving due to a recovering housing market; stronger retail sales, led by e-commerce; and increases in port traffic, led by a 13.4% year-over-year increase at the Port of Long Beach.

Average asking lease rates increased by 6% over the past year. Continued strength in sale and lease values is expected for class A and class B space throughout this year.

A record number of larger transactions occurred during the third quarter, including the Phoenix Warehouse lease of a newly constructed, class A, 305,422-square-foot, free-standing building owned by IIT; Westcore Property’s lease of 288,000 square feet in Santa Fe Springs to Universal Logistics Group-West; and Animal Supply Co.’s lease of 116,327 square feet in Whittier, among others.

Other Transactions

Several other sizable transactions were well in the works at the end of the third quarter that will continue absorption and force the decline in supply for large blocks of quality space.

Continued momentum in the market is expected, with no slowdown in demand, though there could be impacts caused by the federal government’s actions, fluctuations in interest rates, and movement in the unemployment levels.

The Mid-Counties submarket remains a pre-eminent market due to its proximity to major freeways and the Los Angeles and Long Beach ports.

Research and analysis provided by CBRE Research.

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