The Mid Counties industrial market hit a turning point in the second quarter as strong demand pushed supply to its lowest level in six years.
The 133-million-square-foot market straddles the border of Los Angeles and Orange counties and encompasses Santa Fe Springs, Cerritos, Buena Park, La Mirada, Paramount, Downey, Whittier, Cypress, Norwalk, La Palma, Los Alamitos, Lakewood, Bellflower and Artesia.
Transaction volume continued to be led by users in the 10,000- to 60,000-square-foot range, which made 40 of the 49 transactions in the quarter. The square footage absorbed in the period was evenly balanced; nearly 1.2 million square feet was absorbed under 100,000 square feet and roughly 1 million square feet absorbed over 100,000 square feet.
The second-quarter activity among occupiers of more than 100,000 square feet consisted of six leases: Manhattan Beachwear’s lease of 190,800 square feet from Prudential in Buena Park; Integrity Retail Distribution expanding from 84,772 square feet in Santa Fe Springs to 180,848 square feet in La Mirada; and Sohnen Enterprises continuing to expand its Mid Counties footprint by leasing 174,047 square feet at the Golden Springs Business Center. Additionally, after investigating its options in the market, Warehouse Specialties Inc. renewed 203,850 square feet in La Mirada with TA Associates.
The supply of available space in the 100,000- to 200,000-square-foot range is limited, but several buildings of more than 200,000 square feet remain available.
The increase in demand continued to eat away at the supply, as reflected in the drop in the available rate from 7.6% in last year’s second quarter to 5.9% last quarter. The overall vacancy rate also dropped from 3.9% last year to 3%.
The vacancy rate is only 1.6% if you take out the vacant space of more than 200,000 square feet.
The segment of the market under 200,000 square feet has clearly transitioned in the landlord’s favor as levels of supply have shrunk.
Asking lease rates are thus up 5.6% year-over-year, and the year-to-date average triple-net effective lease rate for buildings over 10,000 square feet is up 6.8% over the 2013 average.
Heading into the second half of the year, greater confidence in the national economy seems to be the trend. The stock market is hovering at all-time-high levels; interest rates are still hovering around all-time lows; and the unemployment rate is down to 6.1%. As a result, consumers are fueling the economy with greater retail spending and new home purchases. The momentum promises to propel
demand for space in the strategically located Mid Counties submarket for the rest of the
year.
Research and analysis provided by CBRE Research
