Strong demand and several quarters of good momentum drove the San Gabriel Valley’s industrial market to outperform every other regional market in Southern California in the first quarter.
With a vacancy rate that dropped to 3.5 percent, it was well below the Los Angeles County average industrial vacancy of 4.5 percent, according to data from Jones Lang LaSalle Inc.
While first quarter sales and leasing activity was roughly half that of the prior period – likely a reflection of a tightening market – there is substantial speculative construction under way in the area. That activity is likely to pick up later this year as former redevelopment agency parcels are sold to private developers.
“It’s impressive to think that the little San Gabriel Valley is the strongest market in the region,” said Eric Moore, a principal and managing partner for industrial at Cassidy Turley, “especially when we’re in a very robust market with average vacancy well under the national average of 10 percent.”
A recovering national economy is fueling the growth of the market, which is “firing on all 12 cylinders like a Jaguar,” he said. “Every product that’s imported from the Pacific Rim comes in through the ports. And in most cases, it’s distributed through or warehoused in the San Gabriel Valley.”
Foreign investment, primarily from China but also coming from other countries’ institutional investors, has fueled demand for space and pushed rents upward in recent quarters.
But at 46 cents a square foot a month, prices are still well below the county average of 57 cents, according to JLL data.
The region’s strength is illustrated by the first quarter sale of a 50-year-old Class C flex building in late March. The $16.5 million price paid for the Gary Tech Center in Pomona more than doubled the $7.7 million the 134,500-square-foot property fetched when it last sold almost exactly a decade ago.
Such sales of older, relatively smaller properties that include both office and industrial space are particularly popular in the area, said Stuart C. Milligan, senior director of the industrial brokerage at Cushman & Wakefield of California Inc. “There is tremendous interest in the purchase of smaller to midrange properties, which seem to be right in the wheelhouse for many of our buyers,” he said. Most are immigrant business owners doing import-export who have grown out of their smaller multitenant industrial park startup space and now need larger warehouse and distribution facilities.
Many are unable to purchase due to lack of inventory, he said. But that problem should be eased by the multiple properties that will be sold this year by the City of Industry’s former redevelopment agency, which holds close to 50 parcels it must sell. An early June deadline for letters of intent from buyers on a handful of lots means construction on some of the developments could start as early as the fourth quarter, Milligan said.
With a recovering economy and the amount of foreign investment pouring into the San Gabriel Valley, the challenge for the region and for greater Los Angeles County is to translate that into job growth.
“We love jobs, we’ll take any jobs over losing jobs,” said Cynthia Kurtz, chief executive of the non-profit San Gabriel Valley Economic Partnership. “But the lower-paying jobs in retail, hospitality and warehousing don’t pay the kind of wages we would hope for in a real robust economic turnaround.”
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A private investment trust purchased Pomona’s Garey Tech Center, at 2771 N. Garey Ave., Pomona for $16.5 million, or $123 per square foot, from Lincoln Property Co. The 134,500-square-foot Class C flex building was built in 1962.
Apparel and luggage distributor 3PL Warehousing and Distribution leased 81,900 square feet at 3920 Capitol Ave. in the City of Industry. The 81,896-square-foot Class B building, adjacent to the 605 freeway, dates to 1979 but had recently been refurbished.
Regional developer Primestor Development Inc. purchased a restaurant location at 3057 E. Garvey Ave. in West Covina in a $15.9 million deal.
Omeda Investment bought 3333 Diamond Canyon Road in Diamond Bar in early January for $10.5 million. The 37,500-square-foot Class B office building was built in 1989 and is fully leased to Biosense Webster Inc., a designer and maker of cardiac catheters and other medical devices.
Two West Covina properties that once housed St. Martha’s Episcopal Church and school at 520 S. Lark Ellen Ave. were sold for $8.4 million in late February. The parcels were sold for land value by Warmington Group to KB Home, which plans a single-family residential development for the site.
