The mid-counties industrial market—situated at the border of Los Angeles and Orange counties—continues to mark a slow but steady recovery.
In Orange County the market includes Buena Park, Cypress, La Palma and Los Alamitos. In Los Angeles County its cities include Santa Fe Springs, Cerritos, La Mirada, Paramount, Downey, Whittier, Norwalk, Lakewood, Bellflower and Artesia.
Class B real estate continued to see inconsistent levels of activity in the third quarter, but class A properties were in high demand. Overall, the decline of lease rates and increase of tenant incentives have led to greater activity, which in turn caused the availability rate to drop 20.8% over last year to 7.6%.
As the market tightens, lease rates are expected steadily increase as seen by the 6.1% jump from the third quarter of 2010.
Larger transactions—those above 100,000 square feet—accounted for 56% of the 2,308,493 square feet of total gross absorption during the third quarter of 2011.
These transactions included a 10-year, 613,375-square-foot lease with Michael Kors in the Whittier Gateway project and an 180,969-square-foot, 10-year lease with Cotton On USA Inc. at 16509 Trojan Way in La Mirada.
The mid-counties market recorded negative net absorption of 420,180 square feet for the quarter, but the availability and vacancy rates—have been fairly stable. This is a marked improvement from the availability rate of 9.6% for the third quarter of 2010.
Average asking lease rates have maintained the same level of $0.52 for the last two quarters, while the average asking sale price has decreased from $99 to $94 per square foot.
There were six user-sale transactions in the third quarter, with the smallest being 15,020 square feet at 12711 Imperial Highway in Santa Fe Springs. The largest was 84,937 square feet at 14821 Artesia Blvd. in La Mirada.
There was strong investment-sale activity in the third quarter, including four notable deals.
KTR Capital Partners acquired two separate deals—a 79,933-square-foot single-tenant building in La Mirada and the 613,375-square-foot building that it leased to Michael Kors in Whittier. Dexus acquired a 292,080-square-foot building in La Palma, and TA Associates sold the 309,264-square-foot Rock Tenn Super Plant in Cerritos to the estate of James Campbell and Orchard Partners.
Steve Young is a senior associate in the Orange office of CBRE Inc.
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Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
