Business optimism was evident in the Mid-Counties industrial market during the second quarter as transaction volume increased about 19% to 50 from 42 a year earlier.
Gross absorption rose 8.9% to roughly 1.8 million square feet, including four transactions of more than 100,000 square feet, with leases of 173,990 square feet to Hybrid Promotions in Cypress, 159,943 square feet to Cavotec Inc. in Cypress, 146,640 square feet to WSS in Cerritos, and the largest user sale of the year in Cerritos for approximately 199,937 square feet to Prime Wire.
Buildings of less than 100,000 square feet also surged, with gross absorption of 781,590 square feet, a 78% increase from the first quarter and 59% more than what was recorded a year earlier.
Qualities
The Mid-Counties area is central to the five-county Southern California region of Los Angeles, Orange, Riverside, San Bernardino and Ventura counties, but it’s outside the congestion of the downtown L.A. core. Its excellent labor pool; a modern, functional industrial base; and a clean, safe environment continually makes the market a choice for many industrial users.
Companies, with the positive news throughout many sectors of the economy, including a dropping unemployment rate, are more confident to pursue new deals in the market.
Still, despite the strong increase in activity throughout the Mid-Counties market, the overall levels of supply increased, with the availability rate up to 7.6% and the vacancy rate up to 3.9%. That may be attributed to the unusual increase in vacancy in buildings 100,000 square feet and larger. In the second quarter alone, more than 1.9 million square feet were vacated, including roughly 1.2 million square feet in buildings 100,000 square feet and larger. The increase in vacancy resulted in negative net absorption of 887,548 square feet.
Several larger leases are currently under negotiation, further brightening prospects for the second half of the year.
Opportunities for industrial users looking for larger class A buildings will continue to be limited, resulting in higher lease rates. Sale prices for buildings will continue to increase due to the limited supply and favorable interest rates. The Mid-Counties market will also attract exported demand from surrounding submarkets that currently have even lower levels of vacancy, including the South Bay, at 1.5%; L.A. Central, at 2.4%; and North Orange County, at 2.3%.
The approximately 132-million-square-foot Mid-Counties market encompasses the cities of Santa Fe Springs, Artesia, Bellflower, Buena Park, Cerritos, Cypress, Downey, La Mirada, La Palma, Lakewood, Los Alamitos, Norwalk, Paramount and Whittier.
Data and analysis provided by CBRE Group.
