By GARRETT CARTER and RICHARD MCGEAGH
The strategically located Mid-Counties industrial real estate market continued to attract businesses with 432,004 square feet of net absorption in the fourth quarter.
This follows 478,272 square feet absorbed in the third quarter.
Major additions to the Mid-Counties’ corporate roster include: Best Buy Co.’s Pacific Sales, which leased 304,708 square feet in Gateway Pointe in Whittier; California Transport Enterprises, which leased 164,129 square feet in Cypress; VT Industries’ acquisition of 137,000 square feet in La Mirada; and Jamestone Furniture, which took 115,000 square feet in La Mirada.
The companies were drawn by the area’s closeness to the ports of Los Angeles and Long Beach and access to seven freeways.
Gross activity for the fourth quarter remained at a steady pace, totaling 1.9 million square feet, which is nearly equal to that of the third quarter. While the fourth quarter’s activity was unseasonably strong, the level was less than robust.
Market Pause
Compared to the fourth quarter of 2005, gross activity actually was down 33%. There’s no cause for alarm. The slower pace stems from a pause by prospective tenants and buyers as they analyze higher prices and a limited supply of available space.
At the end of the quarter, the overall availability rate stood at 4.7%, down 13% from the same period a year earlier. The actual vacancy rate dropped to an all-time low of 1.8%, down 33% from a year earlier.
Limited space and stable demand continues to push prices higher. Compared to the fourth quarter of 2005, the average asking sales price is up 40% to $132.08 per square foot. The average asking monthly lease rate is up 7.5% to 57 cents.
Actual effective lease comparables in many instances have appreciated at an even higher clip as concessions diminished and the frequency and rate of rent adjustments have grown. This trend has been seen throughout 2006 and should continue in 2007.
Port Activity
Despite a slowdown in the housing market, the national economy remains healthy and investment by Corporate America is strong.
Regionally, port activity continues to set new highs and is projected to increase further in 2007. Employment in Los Angeles and Orange counties remains strong.
Locally, there are only 308,575 square feet of buildings under construction. CB Richard Ellis’ Torto Wheaton Research is projecting rent growth in 2007 of 5.9% in Los Angeles County and 7.8% in Orange County.
Straddling the line of these counties, Mid-Counties should comfortably fall in this range. All of these factors and strong activity at the outset of the year have bolstered confidence for continued appreciation and rent growth in this market.
Carter is a vice president in the Anaheim office of CB Richard Ellis. McGeagh is a senior vice president in the South Bay office of CB Richard Ellis.
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