Real Estate Watch: Mid-Counties
Large Deals Could Signal Turnaround
By GARETT CARTER
Several large deals, including ServiceCraft LLC’s 661,000-square-foot lease in Buena Park’s Commerce Centre, signal a turnaround in the Mid-Counties industrial market, which began to heat up in the summer.
Small-building activity in the 10,000-square-foot to 50,000-square-foot range remains strong, limited only by short supply.
Vacancy rates have climbed slowly during the year to 2.8% in September. Available industrial space has risen to 7% of the base. Most of the increase in vacancy and availability can be attributed to an increase in sublease space in the market.
Average asking lease rates for Mid-Counties industrial space have been flat at 53 cents per square foot for well over a year.
New construction activity has dropped off significantly this year. But that will change dramatically in the fourth quarter as three major projects are set to break ground in Santa Fe Springs.
Overall, 13 buildings, ranging in size from 21,000 square feet to 240,000 square feet, are set to start construction in the fourth quarter in the region. Each will be available for sale or lease.
These new buildings will complement the ongoing Golden Springs project, with buildings available for lease from 29,000 square feet to 220,000 square feet.
The Mid-Counties industrial market consists of Santa Fe Springs, Artesia, Bellflower, Buena Park, Cerritos, Cypress, Downey, La Mirada, La Palma, Lakewood, Los Alamitos, Norwalk, Paramount and Whittier. The region has an industrial base of 125.5 million square feet and is one of the most central distribution areas, close to about 16 million people in Southern California.
A central location, proximity to the ports, strong labor base and transportation facilities have made the Mid-Counties one of the most stable industrial markets nationwide for the past three decades.
With gross activity of almost 2 million square feet in the third quarter, the Mid-Counties industrial market is positioned for continued growth and expansion into 2003.
Overall, supply will remain limited. Demand will continue to outpace supply for buildings less than 50,000 square feet. Activity on larger buildings is expected to pick up in the coming months.
Lease rates should remain flat for the foreseeable future; but user-owner demand, driven by historic low financing rates and limited availability, will continue to drive sale prices higher.
And, driven by strong fundamentals and historic stability, industrial net leased investment sales will see multiple offers on each property.
Carter is a vice president in CB Richard Ellis’ Southern California Manufacturing Facilities Group.
