The Mid-Counties Market consists of the cities along the border of Orange and Los Angeles counties. The industrial market in Mid-Counties continued to report healthy and active patterns while the office market softened a bit.
The Office Market
Due to the small size of the market, even moderate swings in activity can influence the Mid-Counties’ market indicators more dramatically than in larger markets. The relocation of a single large tenant (67,000 square feet) in Cerritos, pushed the vacancy rate in that city up to 17.02% and caused the average office vacancy rate for the Mid-Counties market to increase to 23.71% from 21.53% in the second quarter. The vacancy rate for Class A office space during the third quarter was 19.60%, accounting for 26% of the total vacant office space in the Mid-Counties market area.
The average asking full-service-gross lease rate for vacant space in the Mid-Counties Office Market is up 1 cent (0.6%) to $1.61 per square foot from $1.60 in the second quarter. The third-quarter rate is the same as in 1998’s third quarter. Average asking lease rates range from a high of $1.92 per square foot in La Palma to a low of $1.38 per square foot in Downey.
The Mid-Counties Office Market narrowed the absorption gap by 160,686 square feet. During the third quarter, approximately 93,892 square feet of negative net absorption was experienced, compared with the 254,578 square feet of negative net absorption experienced in the second quarter.
Two 21,000-square-foot buildings at Heritage Springs in Santa Fe Springs broke ground in September for a total of 42,636 square feet. Completion is expected in June 2000. An additional two buildings are planned for construction in the same project.
The Industrial Market
Industrial sale and lease activity in the Mid Counties market jumped 21% in the third quarter, to 2.7 million square feet from 2.3 million square feet of activity in the second quarter. Along with a 12% decrease in vacant space, net absorption catapulted to 1.25 million square feet from a negative half-million square feet in the second quarter. Year-to-date net absorption totaled 2.1 million square feet with another 1.5 million square feet predicted for the final quarter of the year. The availability rate decreased to 6.5%, from 7.4% in the second quarter.
Scarcity and demand for industrial space are pushing sale and lease prices upward. Both gross and net lease rates increased 2 cents. The average asking net lease rate for buildings larger than 10,000 square feet increased 5% to 44 cents this quarter from 42 cents in the second quarter. Gross lease rates increased to 4% to 50 cents, from 48 cents in the second quarter.
