Industrial activity during first quarter falls short of year-ago level.

Los Angeles County's industrial real estate market was marked by brisk activity and a flurry of post-earthquake relocations in the first quarter of 1994, brokers reported. But overall sales, leasing and vacancy figures fell slightly short of the stronger 1993 first quarter.

"We expect business to significantly pick up in the second and third quarters, based on first-quarter deals in progress," commented Jim Center, a vice president at the commercial brokerage firm Grubb & Ellis Co.

John Minervini, a broker at commercial brokerage firm Cushman & Wakefield of California Inc., agreed. "We are definitely seeing a pick-up in the (industrial) market, in both sales and leasing," Minervini said.

But that supposed pick-up was not reflected in the first-quarter figures, which were flat or depressed from the year-ago period. Only the South Bay region showed a sales increase for industrial real estate: 306,000 square feet, compared to 212,000 for first quarter 1993.

The overall L.A. County industrial vacancy rate was 15 percent at the end of the first quarter, Cushman & Wakefield reported, a slight improvement from 16.7 percent a year earlier. The county's highest industrial vacancy rate was recorded in its largest market - downtown Los Angeles, which had 17.3 percent of its industrial space vacant at the end of the first quarter, Cushman & Wakefield reported. The South Bay market posted a healthier 13.3-percent industrial vacancy rate, and the Los Angeles North market posted a 14.2-percent industrial vacancy rate.

Despite the somewhat disappointing numbers, industry experts insisted they are upbeat. "During 1994, demand for modern, well-located warehouses and distribution facilities should pick up. The demand should be particularly strong in areas with good access to the Ports of Los Angeles and Long Beach International Airport and Ontario Airport," according to a Grubb & Ellis industrial market report.

Among the positive signs of market stabilization and growth seen by Al Beaudette, manager of the Torrance office of CB Commercial Real Estate Group Inc., are rising rents, a resurgence in build-to-suits and a handful of owners and developers looking at speculative projects again.

Spurring those projects is the rapid leasing-up of high-quality, larger facilities. "We're seeing a pronounced shortage of 100,000-plus-square-foot |Class A' product. Those are disappearing rapidly," Beaudette noted.

"We're running out of big boxes," Center agreed. "We're just about out of 200,000-plus-square-foot industrial spaces," the Grubb & Ellis broker said. "Demand continues to pick up," he added, with "users out lookig for land."

Among the significant deals closed in first quarter 1994 were:

* General Tire Inc. signed an $8 million, three-year lease-back agreement with World Bargains Inc. for the 332,790-square-foot facility General Tire uses for its southwestern tire distribution center on East Arenth Avenue in the City of Industry. World Bargains plans to use the facility for its gift-importing headquarters when General Tire's lease expires in three years, sources said.

* Little Tykes Co. expanded its 200,000-square-foot City of Industry plastic-toy manufacturing center by 60,000 feet in a $3 million lease renewal deal that will allow it to use the increased space on Walnut Drive by the end of April.

* Also expanding in City of Industry is GATX Logistics. The warehousing firm signed a three-year lease for an additional 300,000 square feet in the Fairway Business Park. That deal brings the Fairway Business Park to fully-occupied status, according to owner Majestic Realty Co. The park's final 100,000-square-foot phase is scheduled to break ground in second quarter 1994, a Majestic spokesman reported.

* Ingram Distribution Group Inc., a book-and-video distribution company, signed a five-year, $3.6 million lease renewal for its 200,000 square feet of space on Business Parkway in the City of Industry.

* In other regions, trucking-and-warehousing company Western Sunset International leased 201,000 square feet for $4.3 million for six years in Rancho Dominguez.

* Nippondenso Co. Ltd., an automobile components manufacturer, leased 174,119 square feet of space for five years at Watson Industrial Center South in Carson to use as a distribution center. The company said the new space will help alleviate a space crunch at its Long Beach headquarters. The lease value is $3.4 million.

* McKesson Corp. leased 252,000 square feet of distribution space on Norwalk Boulevard in Santa Fe Springs. The value and term of the lease were not disclosed.

* Packard Bell Electronics Inc. leased 160,498 square feet of space for approximately $4.5 million for two years in Westlake Village to manufacture, warehouse anddistribute of personal computers as of Jan. 18, the day after its Chatsworth facility was disabled in the Northridge earthquake.

Elsewhere in the San Fernando Valley, there was a significant round of short-term lease activity following that temblor. "There's been a lot of absorption because of the quake," Cushman & Wakefield broker Minervini observed. "Businesses needed space quickly, and landlords made concessions, hoping they'd stay."

The local space shortage was unique and unprecedented, Minervini said. "This has really never happened before. The Whittier and Sylmar quakes did not affect the market at all," recalled the industrial veteran, who has been brokering L.A. industrial transactions for nine years.

"Our brokers like to say that the vacancy rate went from 12 percent to zero percent in a week," laughed CB Commecial's Beaudette. "That's an exaggeration, of course. But the (vacancy rate) percentages will easily be a few points lower (than before the quake)," he said.

Grubb & Ellis analysts agreed in their preliminary 1994 report: "The Northridge quake rendered 4 million to 5 million square feet of industrial space temporarily or permanently uninhabitable, which should shave several percentage points from the year-end vacancy rate," the analysts predicted.

The change was not reflected, however, in Cushman & Wakefield's first quarter 1994 figures for the Los Angeles North district - which includes the quake-impacted San Fernando Valley and Santa Clarita Valley, as well as the San Gabriel Valley, other northern L.A. County areas and parts of Ventura County. That district, in fact, actually showed a slight decrease in leasing activity - 1.8 million square feet leased, compared with 2.2 million in first quarter 1993, according to Cushman & Wakefield.

"In general, we had more vacancies from properties coming back on the market and companies going out of business," Minervini explained. The industrial market for L.A. County as a whole is still suffering the residual effects of the region's recession, he added.

But the Cushman & Wakefield broker - and industrial experts at other firms - said they are optimistic about the rest of the year and 1995. "We're going to need to build some buildings," Minervini commented. "I don't think you're going to see a huge (1994 industrial building) surge. That's probably a year away," he projected.

Los Angeles County Industrial Market First Quarter 1994

Submarket              Vacancy   Leasing   Sales
                       3/31/94   activity  activity
                                 (000s square feet) (000s square feet)
Los Angeles Downtown   17.3%     4,952     4,210
Los Angeles South Bay  13.3      2,006     306
Los Angeles North      14.2      1,807     323
Los Angeles Total      15.0      8,765     4,839