Second Quarter 2008 San Gabriel Valley Industrial

Tight Industrial Market Begins to Soften As Vacancy Rates Rise

The overall vacancy rate increased over the quarter to end at 3.4%, a 1.6% increase over the total vacancy rate from the previous quarter. Especially hard hit has been the big box segment (100,000+ SF) in the Industry submarket, where the vacancy rate went from 0.4% last quarter to 2.9% this quarter. Large users, especially transportation companies and retail / wholesalers, have put space up for sublease or have moved out completely, due to diminished space needs.

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Most of the rise in the vacancy rate and negative net absorption came from the Industry submarket (City of Industry, Baldwin Park, Diamond Bar, La Puente, Pomona and Walnut).

What went on:

620 Hacienda: A 140,000 SF building in Industry with 25,000 SF of refridgerated warehouse and 16,500 SF of freezers space. Orignially the tenant was Vien Dong and ethnic food company which has since moved to San Diego. From what I can tell, Super 7 Cash and Carry was subleasing the space, but all that space is now immediately available, so that is -140,000 SF of net absorption.
Since the space is refridgerated warehouse, the rents are higher @ $0.60 N. This pushed up the asking rents for the region.

13155 Railroad: 124,400 SF of warehouse asking $0.57 G*, 8,000 SF office. (*Gross asking rates are not recorded in our reports) ABE furniture just moved out this quarter, rumor is they are filing for bankruptcy. They have many smaller locations in Southern California and they are most likely consolidating space. Furniture companies have been hard hit by the housing downturn. Colliers has represented this tenant since 1993 at this location. Tough times all around.

3777 Workman Mill: 206,980 SF previously occupied by Four Seasons General Merchandise and available for sublease @ $0.59 G (Sublease space is also not included in our rent calculations, nor are gross leases) They leased out the entire builiding, 613,375 SF, and I guess they don't need this portion. They moved in at $0.45 N three years ago with a mid-term CPI bump, at least 3%, so they should be paying $0.46 - $0.47. So the Net to Gross (asking) of around $0.12, which is spot on for the Industry market. Especially for a newer building. Pretty reasonable considering.

1601 Mission Unit 6: 241,000 SF of sublease vacant space. Carrier Central Air Conditioners was in here before, but they moved their operations to Commerce. Right now, Razor Scooters is leasing out 125,000 SF of this 241,000 Sf on a month to month basis (which will lower the vacancy rate a bit, since this space would be counted as available space, since it is month to month, but does not count as vacant space).
So the vacancy rate is really a moving target, it changes a little bit with every deal.