By JOSHUA BONWELL
Industrial leasing and sales in the Mid-Counties area along Orange County’s line with Los Angeles set a record in the third quarter.
It was the highest level of quarterly activity in the history of the submarket at 3.5 million square feet.
Leasing led the surge with 2.6 million square feet rented. The tremendous increase in activity is reflected not only by the total square footage volume but also by the 70 transactions spread across all sizes of buildings.
The total topped the 65 transactions seen in the first and second quarters combined.
Net absorption rebounded with 767,411 square feet taken off the market as Mid-Counties enjoyed an influx of demand from neighboring submarkets.
These deals were highlighted by St. George Warehouse Inc. from Compton, which preleased a 454,826-square-foot cross dock building, and Bravo Sports from Cypress, which leased a 154,000-square-foot building.
Both deals were in the Golden Springs Business Center in Santa Fe Springs.
Living Spaces Furniture LLC went against the flow in which large users have headed to the Inland Empire for less inexpensive space. The furniture retailer expanded from Rancho Cucamonga into LBA Realty’s newly renovated, 277,564-square-foot former Crown Cork and Seal Co. building.
With less space in neighboring submarkets (South Bay, Commerce/Vernon, San Gabriel Valley and OC), Mid-Counties should see increased demand as users search for more alternatives outside their ideal location.
The activity has driven the availability rate in Mid-Counties to the lowest level in more than two years, 6.7%.
The actual supply of space for a business requiring new term occupancy is even lower, evidenced by an existing (not including under construction) availability rate of 5.3%, and a true vacancy (ready for immediate occupancy) rate of 3.9%.
Institutional investors continue to covet industrial real estate in this historically stable and strategically situated submarket.
Their enthusiasm is exemplified by aggressive purchases of sub 6% in-going capitalization rates and a willingness to buy vacant buildings, assuming the renovation and releasing risk.
ING Clarion Partners highlighted the third quarter with its buy of the 504,430-square-foot Whittier Distribution Center. ProLogis was rewarded for its aggressive pursuit and acquisition of the soon-to-be vacated 221,415-square-foot former California Distribution building in La Mirada.
ProLogis has preleased the front 125,415 square feet for seven years.
Escrows and pending leases portend even more activity in this market.
The diminishing supply and strong demand are pushing sale and lease values to record levels. Strong employment statistics, record container traffic at the ports of Long Beach and Los Angeles and interest rates that remain historically low suggest this momentum will carry over and push values well into 2006.
Bonwell is a senior associate in the Anaheim office of CB Richard Ellis Group Inc.
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