If you are searching for positive indicators in the economy, the Mid-Counties Industrial real estate market has been delivering.
This 132-million-square-foot industrial market that straddles the Orange and Los Angeles county line has enjoyed a tremendous resurgence in 2010.
Gross activity at midyear totaled 3.8 million square feet as compared to 1.8 million square feet for the same period in 2009, a 111% increase. The total number of sales to businesses and leases was up 120% from 44 in 2009 to 97 in 2010.
Stimulated by aggressive landlord concessions, leasing represented 92% of the activity.
A comparison of quarterly statistics proves the recovery has gained momentum. In the second quarter, gross activity surged to a total of 2.2 million square feet in 55 transactions, as compared to 1.5 million square feet in 42 transactions in the first quarter.
Positive activity spread throughout all segments. In the second quarter of 2010, gross activity was up to 1.4 million square feet for buildings in the 10,000- to 99,999-square-foot range, versus 732,287 square feet in the first quarter and 865,822 square feet in the second quarter of 2009.
For buildings greater than 100,000 square feet, the gross absorption totaled 846,448 square feet—this clearly illustrates the difference in activity in the past year as no buildings 100,000 square feet or larger were absorbed in the second quarter 2009.
Larger second-quarter transactions included: a 196,332-square-foot renewal by Easy Life Furniture Inc. at Prologis Mid-Counties Distribution Center in Buena Park; a 155,484-square-foot lease by Amway Corp. at Golden Springs in Santa Fe Springs; a 148,305-square-foot lease by Wham-O Inc. at Golden Springs; a 128,000-square-foot lease extension by Processing & Distribution Services Inc. in Cerritos; a 116,327-square-foot renewal by Archway Marketing Services at the ING Whittier Distribution Center; and a lease of 102,000 square feet by Richmond Aircraft Products Inc. in Santa Fe Springs.
Net absorption also gained momentum. After eight consecutive quarters of negative net absorption throughout 2008 and 2009, the Mid-Counties market posted a positive 6,014 square feet in the first quarter and another positive 69,631 square feet in the second quarter.
Landlords and sellers have reacted to stimulate demand. The average asking lease rate now is at 51 cents per square foot, triple net, which is down 9% from a year earlier.
The average asking sale price is $100.20 per square foot, which is down 13% from a year earlier.
Can these favorable trends be sustained? The third quarter saw several larger transactions signed. Beyond that we must focus on macroeconomic indicators such as activity at the ports of Los Angeles and Long Beach, which has been on the rise, as well as consumer spending, unemployment and the stock market.
Bonwell is a vice president in Anaheim office of CB Richard Ellis.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
