The Mid-Counties industrial market saw a 47% increase in year-over-year gross absorption in the fourth quarter, or nearly 2.5 million square feet compared to roughly 1.7 million square feet.
Net absorption came in at a positive 1 million square feet, the highest level for a quarter in a decade, since the fourth quarter of 2005, when it stood at about 1.6 million square feet.
Sale and lease activity totaled 52 transactions for the quarter.
Six Transactions
Six transactions of more than 100,000 square feet occurred during the quarter, including five leases:
n 186,800 square feet by IndCor Properties to OTX Logistics in Cerritos;
n 146,326 square feet to 7-Eleven and 142,290 square feet to Crate & Barrel by Carson Cos. in Santa Fe Springs;
n 124,894 square feet by Cypress Land Co. to Earth Friendly Products in Cypress;
n and 117,800 square feet by TA Associates LP to GRM in La Mirada.
The lone user sale was a 237,089-square-foot building Heitman LLC sold to Dunkel Brothers in La Mirada. CBRE participated in four of the six deals.
The positive momentum resulted in a 30% decrease in the availability and vacancy rates, which declined to 4.3% and 2%, respectively, at quarter’s end. The levels of supply are at their lowest in seven years.
Gross absorption in the Mid-Counties submarket was about 8.9 million square feet for the year, 13% higher than in 2013, as well as a 10-year high. Lease transactions accounted for 86% of the volume, and user sales represented the rest.
Strong leasing activity throughout the year resulted in a 7.3% increase in the average asking lease rate for buildings 10,000 square feet and larger, from 55 cents per square foot in the first quarter to 59 cents per square foot in the fourth.
We can expect a continued optimistic outlook for the Mid-Counties market this year, with consumer confidence being at a seven-year high and coupled with lower gas prices and an improving job market. Opportunities for industrial users looking for larger class A buildings will remain limited, resulting in higher lease rates, speculative development, and continued value increases.
Attractive
Mid-Counties continues to be an attractive destination to users because of its central location and close proximity to the Long Beach and Los Angeles ports, as well as close proximity to LAX and John Wayne Airport.
The submarket is centrally located within the five-county Southern California region and yet is outside the congestion of the downtown Los Angeles core.
It offers a strong diverse labor pool, modern functional industrial base, and a clean and safe environment, so it continues to be the first choice of many industrial users.
Research and analysis provided by CBRE Research
