There are continued signs of strength in the Mid-Counties industrial market, although industrial demand in the area near the border of Los Angeles and Orange counties slowed during the second quarter after a robust start to the year.
Transaction volume for the second quarter included sales and leases that totaled 1.7 million square feet, down from 2.2 million square feet during the first quarter.
Availability Rate
The brisk pace of sales and leasing activity over the first half of the year left the availability rate for the Mid-Cities market at a three-year low of 6.8%. It’s the first time the availability rate in this submarket has fallen below 7% since the first quarter of 2009.
Demand continues to be heavily weighted toward relatively smaller spaces. There were only three transactions of more than 100,000 square feet in the second quarter, and 80% of the total transaction volume was for buildings smaller than 50,000 square feet.
Several factors have played a role in the resurgence in activity among smaller tenants, including aggressive lease rates and concession terms offered by landlords of older and less-functional buildings; historically low interest rates fueling demand among tenants looking to buy; and a moderate improvement in optimism in the overall economy compared with the same time a year ago.
Transactions of more than 100,000 square feet have been limited in number due to a shortage of larger blocks of available class A space. A few new class A developments now are under way.
Outlook
The outlook for the Mid-Counties area over the next 12 months remains generally favorable.
Demand for space and business spending will continue to be stimulated by historically low interest rates, a stabilization in the housing market, and a gradually rising stock market.
They also will continue to be stimulated with an increase in consumer spending resulting from pent-up demand, while the low levels of supply will support higher lease rates and sale prices for newer buildings.
Biven is a first vice president in the Santa Fe Springs office of CBRE Group Inc.
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