By Mike Foley, John Biven and Garrett Carter
While the national economy has been in a recession for more than a year, there are signs that it is stabilizing.
Banks are reporting profits and interest rates at historic lows, which have been a benefit to home buyers and those who are able to refinance. Unemployment seems to have stopped its freefall.
But Orange County is not out of the woods yet.
Similar to what has been seen for the past year, the business community continues to postpone capital expenditures and reduce work force in an effort to cut costs.
Southern California industrial tenants facing lease expirations are opting for short-term lease extensions and landlords are doing all that is necessary to retain tenants and keep up occupancy. Property owners continue to be very aggressive in their attempts to attract new tenants with rental and broker incentives. Landlords also are spending an inordinate amount of time dealing with business failures and the associated requests for rent relief.
Sublease opportunities have increased by 77% from first quarter of last year.
Port Signs
At the Port of Los Angeles, the nation’s busiest cargo container port, about 278,000 containers carrying imported goods arrived in March, down 6.2% from a year earlier, port officials recently said. That was the slowest March performance in seven years, but it was substantially better than February, when only 206,000 containers arrived.
According to AXS-Alphaliner, a unit of Paris-based AXSMarine that tracts the world’s largest shipping lines, about 10% of the world’s container fleet was idle during the last week of March because the ships had no cargo. While the number represented a slight improvement from previous weeks, it still was twice as high as the industry’s previous slump in 2002.
At the end of the first quarter, gross activity in the mid-counties market totaled 1.1 million square feet, which represents an 8% increase from the fourth quarter and a 30% increase from a year earlier.
Net absorption, while still negative, improved by 22% in the first quarter from a year earlier.
On the supply side, the availability rate has increased 48% during the last year to 6.8%. The actual vacancy rate has increased more modestly at a rate of 18% to rest at 3.3%. Both still are low when compared to other regional industrial submarkets.
Big Deals
Significant lease deals for the first quarter included a two-year sublease by Saddle Creek Corp. of a 268,536-square-foot warehouse in Santa Fe Springs, and KSDS Enterprises Inc. signed a five-year lease on a 112,152-square-foot warehouse in La Mirada that is owned by International Airport Centers LLC.
Additionally, Lincoln Electric Co. moved from a 60,000-square-foot building in Norwalk and leased a 53,176-square-foot warehouse in north Santa Fe Springs. Perfect Fit Industries Inc. leased 96,758 square feet and US Tamex Corp. leased 56,322 square feet in a two-tenant Whittier warehouse that recently was renovated by Rexford Industrial.
While the investment and user sale market has stalled due to several factors including price uncertainty and demanding banks, the number of new tenants in the market searching for favorable lease deals has increased during the past month.
Foley is a senior vice president in the commerce office of CB Richard Ellis Group Inc. Biven is a first vice president in the Santa Fe Springs office of CB Richard Ellis. Carter is a vice president in Anaheim office of CB Richard Ellis.
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