High demand for real estate in the Mid-Counties industrial market continued through the second quarter.
Vacancy and availability rates decreased due to increased demand and limited availability.
The market is centrally located in the five-county Southern California region of Los Angeles, Orange, Riverside, San Bernardino and Ventura; yet it is outside the congestion of the downtown Los Angeles core.
Offerings
It offers a strong and diverse labor pool, modern functional industrial base, and a clean and safe environment, and thus continues to be the first choice of many industrial users. The market is approximately 133 million square feet.
Gross activity of 1.9 million square feet in the second quarter was down 14.4% from the second quarter of 2014.
The vacancy rate dropped from 1.5% in the first quarter to 1.4% in the second.
There are many large transactions in the pipeline that could close early in the third quarter, including a lease of 306,286 square feet on Mollette Street in Santa Fe Springs.
Three large occupier transactions of more than 200,000 square feet led gross activity:
• Priority 1’s lease of 278,000 square feet from Invesco in La Mirada;
• Wheel Pros’ lease of 272,548 square feet in Buena Park at the Mid-Counties Distribution Center;
• and Gupta Holdings Inc.’s purchase of 208,432 square feet in Santa Fe Springs.
Large blocks of available space are now in limited supply in the market. There are a few large building developments that are scheduled to break ground in the third quarter and would help to fill the void. Also providing a surge in volume were the 46 transactions of between 10,000 square feet and 50,000 square feet compared to 29 in the first quarter, about a 60% increase.
Limited Supply
The continual increase in demand for space of less than 50,000 square feet continued to eat away at supply, as reflected in the drop in the vacancy rate from 3% in the second quarter of 2014 to 1.4% in this year’s second quarter. Class A and now class B space are in limited supply, with multiple offers on all properties for lease and sale becoming the norm.
Increased competition by tenants and buyers for limited quality buildings will continue to drive values higher and minimize concessions.
Average asking lease rates increased from 57 cents per square foot in the second quarter of 2014 to 61 cents in the second quarter of 2015. There was also a 12.9% increase in average asking sale prices over the past 12 months, ending the second quarter at $132.78 per square foot.
Perkins is a senior vice president at CBRE.
