The third quarter in the Mid-Counties industrial market continued where it left off at the end of the second quarter, whose strong demand pushed levels of supply to their lowest in six years.
Demand continued, resulting in about 2.3 million square feet of gross activity during the quarter.
The 133-million-square-foot Mid-Counties industrial market straddles the border of Los Angeles and Orange counties.
The square footage absorbed in the quarter was also evenly balanced as it was in the second quarter, with 1.1 million square feet absorbed at spaces less than 100,000 square feet and 1.3 million square feet absorbed at spaces more than 100,000 square feet.
Activity
Activity among occupiers of more than 100,000 square feet consisted of five leases and two sales, including FedEx leasing 327,934 square feet in Santa Fe Springs from Panattoni Development Co.; All-Ways Pacific LLC leasing 254,718 square feet in La Mirada from TA Associates; and Bravo Sports renewing 153,724 square feet in Santa Fe Springs from Golden Springs Development Co. There was also the user sale of 174,403 square feet in Santa Fe Springs to Leon Zekaria from Greenlaw Partners.
The continuing increase in demand has further reduced an already-low supply, as evidenced by a drop in the availability rate from 6.6% one year ago to 5.5% in the third quarter, a 16.7% decrease.
The average asking lease rate in the third quarter was 57 cents triple-net, per square foot, an 11.7% increase year-over-year.
The average asking sale price jumped to $124.82 per square foot from $102 per square foot a year ago and $117.64 per square foot in the second quarter, 18.3% and 5.8%, respectively. The user sale market continued to be strong, with little product to buy and land at a premium due to lack of availability. The average asking sale price is expected to rise and reach new record-breaking heights as long as mortgage rates continue to hold at low levels.
The market enters the fourth quarter with a positive outlook and full pipeline. There were already a number of sale and lease transactions on track to close in the first few weeks of the quarter.
The few remaining buildable land sites in Mid-Counties are either tied up or already sold with plans to build industrial buildings. The new projects, along with an already-low supply of buildings, will continue to push average asking lease rates and sale prices higher.
Bonwell is a first vice president at CBRE.
