By GARRETT CARTER AND RICK MCGEAGH
The industrial buildings along the line between Orange and Los Angeles counties are known collectively as the Mid-Counties market.
The cities within Los Angeles County include Santa Fe Springs, Cerritos, La Mirada, Paramount, Downey, Whittier, Norwalk, Lakewood, Bellflower and Artesia. The cities within Orange County are Buena Park, Cypress, La Palma and Los Alamitos. (The cities are listed in descending order by the size of its industrial base.)
Sale and leasing activities in the second quarter were strong and posted a significant increase from the first quarter. But for the second consecutive year, the gross activity in the second quarter was lower than the first quarter.
In the second quarter, transaction activity settled in at about 1.4 million square feet, which is down 18% from the first quarter, and 6% less than the same period a year ago.
One reason for this shift is the continued depletion of available space.
At the end of the second quarter, the overall availability rate dropped to an all-time low of 3.8%.
This is down from 4.3% in the first quarter, and 5.2% at the same period a year ago.
The actual vacancy rate bumped to 1.8%,which is up slightly from the 1.5% in the first quarter, but down from the 2.3% a year ago.
The severely limited supply continues to push sale and lease values higher.
In comparison to second quarter 2006, the average asking triple-net monthly lease rate has risen 10.7% from 56 cents to 62 cents.
Similarly, the average asking sale price has increased about 8.2% from $120.23 to $130.14 per square foot.
During the second half of 2007, sale and lease values should continue to be pushed higher as supply remains extremely low,a trend that even moderate demand will bolster.
User demand will be restrained by moderate growth in the national economy.
University of California, Los Angeles economists are predicting that the real gross domestic product will grow at a rate of 2% for the remainder of the year.
The downturn in the housing market and its related effects on construction, finance and ultimately consumer spending will continue to be areas of concern and restraint for the industrial market.
The same UCLA forecasters anticipate that the damaging effects of the housing downturn will ebb by mid-2008 bolstered by other business activities and strong exports.
“By mid 2008, the economy will be on pace to grow at a healthy 3%,” UCLA predicted.
With limited land to develop new product in this area, values of industrial real estate in the Mid-Counties area promise to grow at a greater pace as these national economic restraints subside.
Carter is a vice president in Anaheim office of CB Richard Ellis. McGeagh is a senior vice president in South Bay office of CB Richard Ellis.
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