Asian Investors, Lot Bidders Crowd Into Already Tight Submarket

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A strengthening recovery and an influx of Asian investors kept the vacancy rate in the San Gabriel Valley industrial market the lowest in the region for the second quarter in a row. Vacancy is at 2.7 percent, down from 5.1 percent just a year ago and 3.5 percent last quarter, according to data from Jones Lang LaSalle Inc.

“I’ve been doing this since 1988 and the market is as strong as I’ve ever seen it,” said Craig Furniss, president of Seventh Street Development. His massive Mission 71 business park, one of the few construction projects in the region, has seen brisk demand and quick sales.

Also setting a blistering pace is the auction of 17 land parcels, ranging from 1.5 to 30 acres, previously owned by City of Industry’s redevelopment agency. Nearly 100 bids were submitted by prospective buyers in early June, said Reginald Bottger, the city’s property manager.

“The prices are higher than I thought they would have been, given historic pricing. It’s a very strong market out there right now,” Bottger said.

All of the bids, ranging from two to 15 for each parcel and which have come from both developers and owner-users, have been countered and sale recommendations are scheduled to be submitted to an oversight board this month, he said. Final state approvals are expected late this year, with construction likely to start in 2015. An additional 35 redevelopment parcels have yet to be put on the auction block.

Word around town is that bids for the best undeveloped properties will be at or above $30 a square foot, setting new highs that put the San Gabriel Valley on par for the first time with traditional Los Angeles County industrial leaders Commerce and Vernon, said Stuart C. Milligan, senior director of the industrial brokerage at Cushman & Wakefield Inc.

“It’s a bidding frenzy based on tremendous pent-up demand,” he said.

Nicole Welch, vice president of JLL industrial services, said leasing demand is also vibrant in the region.

“We’re not quite back to the peak highs of 2007, but we’re only 15 to 20 percent off from peak,” she said.

The difference from seven years ago is that rental rates are rising only modestly. At 49 cents a square foot, up just 7 cents from a year ago, the region’s asking rate remains the lowest in the county, making leases a bargain if they are available.

But few are, Welch said, which adds more fuel to the buying frenzy.

“There’s no (upcoming expiring leases) in the bigger parks that deliver 500,000 square feet and up. Tenants signed 10-year leases back in 2006 to 2008 on most of that property,” she said.

Seeing long-term leases signed before projects like Mission 71 are completed indicates how strong the submarket is, she said.

– Karen E. Klein

San Gabriel Valley

CT Gale of Aliso Viejo purchased a 325,800-square-foot manufacturing facility at 16425 E. Gale Ave. in Industry for $20.7 million, or about $64 a square foot. More than half the 1975 Class B building is leased to apparel firm Swatfame Inc. through 2020. An additional 100,000 square feet will be leased out by the new owner.

Magellan Group Inc. purchased a 26-acre, industrial-zoned parcel at 4127-4213 Temple City Blvd. in El Monte for $20.5 million from Wohl Property Group of Pasadena. The buyer also recently acquired parcels in Duarte, Riverside and Baldwin Park for industrial and storage projects. A planned five-building, 500,000-square-foot industrial park on the site is projected to be completed in late 2015.

Dura Freight Inc. signed a five-year lease extension for its Links Logistics operation at two buildings owned by Majestic Realty at 20595 Business Parkway, Walnut. The company leases approximately 200,000 square feet on the site.

Quest Nutrition, which sells high-protein, low-carb snack bars, expanded into 181,800 square feet at 18551 Arenth Ave. in Industry.

Canadian third-party logistics firm IDC Logistics leased 190,900 square feet at 218 Turnbull Canyon Road in Industry. Clarion Partners owns the property.

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