The mid-counties industrial market turned in the best first quarter since 2007 in terms of overall activity.
The busy pace came despite an historic tendency for slow starts to the year, especially compared to fourth-quarter results that often reflect rushes to make deals before year end.
The industrial market carried the year-end momentum over, with 1,665,919 square feet absorbed. That’s a decline from the busy prior quarter, but a gain of 9% from a year earlier and 52% from the first quarter of 2009.
It wasn’t all upward. The first quarter saw 63,308 feet of negative net absorption, ending a streak of four quarters of gains.
The number of deals also decreased, with 35 compared to 51 in the prior quarter and 42 a year earlier.
Activity at larger buildings was more encouraging.
Gross absorption was higher for buildings 100,000 square feet and larger. Nearly 1 million square feet was absorbed in the segment, a 7% gain from the fourth quarter and a 25% increase compared to a year earlier.
Buildings in the 10,000-square-foot to 99,999-square-foot range saw the biggest slowdown. They accounted for 671,805 square feet in gross absorption. That was down 57% from the fourth quarter and 8% compared to a year earlier.
Healthy Sign
Another perspective on the numbers offers some reasons to view the mid-counties market as getting healthier. The data indicates that larger tenants and buyers are coming to the market at a greater rate than smaller ones.
Larger businesses typically draw smaller counterparts in time, making this an encouraging trend.
Leases accounted for 27 of the 35 deals in the first quarter. They combined for 1,085,208 square feet of space. Notable deals include Phoenix Warehouse Co.’s lease of 220,000 square feet in Cerritos; Faro Services Inc.’s lease of 155,408 square feet in Santa Fe Springs and States Warehouse’s 132,680 square feet in Buena Park.
There were eight sales in the first quarter, representing 580,711 square feet of space. Four of the sales were for buildings 100,000 square feet or larger. The four larger deals accounted for 486,026 square feet of activity. All of the buys were made by companies moving from smaller buildings.
The availability rate fell to 8.3% in the first quarter, down from 8.5% for the prior period and 10.7% in the first quarter of 2010, when it hit an historic high.
The vacancy rate rose slightly in the first quarter to 4% from the fourth quarter and fell slightly from a year earlier.
The average asking rate on leases increased 5%, or two cents a square foot, from the prior quarter to 51 cents. The market peaked in 2008 at 64 cents. Lease rates above 50 cents can be viewed as an indicator of greater confidence among landlords.
The average asking sale price dipped slightly to $97.74 per square foot in the first quarter compared to $99.70 per square foot in the fourth quarter.
Recovery Seen
The data indicates that the mid-counties industrial market has been in recovery for more than a year, led by companies leasing and buying larger buildings and spaces.
Bonwell is a first vice president in the Anaheim office of CB Richard Ellis.
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
