L.A. County industrial market steadily improving; San Gabriel Valley remains healthiest area of county.

The industrial real estate market in Los Angeles County is improving steadily, as inventory shrinks, lease rates and sales prices stabilize and the economy continues to recover, according to local industrial brokers.

A second-quarter report by brokerage firm Grubb & Ellis Co. pegged the countywide industrial vacancy rate at 13 percent on June 30. That represents an improvement from 13.3 percent at year-end 1993.

The San Gabriel Valley remains the healthiest L.A. County industrial market, with a 9.2-percent vacancy rate on June 30, down from a recent peak of 10.8 percent on Sept. 30, 1993.

Industrial vacancy rates have also declined somewhat in the South Bay and Mid-Cities markets since mid-1993, although vacancies have steadily risen since mid-1992 in the Downtown/Central L.A. and San Fernando Valley markets.

Grubb & Ellis Director of Research Bob Bach said: "Tenants and would-be owners sense an economic recovery in the works and are getting off the sidelines and making some deals. Sales and leasing activity for 1994 will likely exceed 1993' total."

In central Los Angeles and downtown, a glut of obsolete buildings continues to bog down the market. But state-of-the-art distribution facilities are selling and leasing briskly, resulting in a significant drop in available Class A space brokers said.

John Privett, a vice president at CB Commercial Real Estate Group Inc., said: "Over the past five years we saw a lot of companies leave the downtown area for lower lease rates and sale prices in the Inland Empire. But that migration seem to be slowing down."

Mervyn Kirshner, senior director of the downtown L.A. office of commercial brokerage firm Cushman & Wakefield of California Inc., said, "There was strong demand for bulk distribution and good-quality (industrial) buildings in the quarter."

The dwindling supply of available, high-quality buildings in L.A. and San Bernardino counties could cause leasing at smaller facilities to pick up in the next six months, said Walt Chenoweth, a vice president in the City of Industry office of CB Commercial.

John Coate of Grubb & Ellis observed: "Leasing is getting more active as the economy recovers. Sales are still sluggish, but banks are starting to loosen up a little, and we expect more deals to be done in the next year."

Coate added that industrial building sales prices are still off 20 to 30 percen from where they were at their peak in 1988-89.

Jim Center, senior vice president at Grubb & Ellis, said: "Rents have stabilized, concessions (e.g. free rent) are becoming fewer, and prices are bottoming out. There are very few real estate owned (foreclosed) properties lef on the market." According to Center, the greatest demand for industrial space i in the San Gabriel Valley, which has been the hottest industrial market for som time.

Los Angeles County Industrial Market
Second Quarter 1994

Submarket                  Vacancy    Vacancy    Sold & leased
year to date (sq. ft.)     6/30/94    6/30/93      (sq. ft.)      Change

Downtown/Central L.A.        15.9%      14.3%       5,071,969      +1.6%
Mid-Cities                   10.7       12.0        3,248,577      -1.3
San Fernando Valley          15.6       13.8        4,121,705      +1.8
San Gabriel Valley            9.2       10.5        3,648,187      -1.3
South Bay                    11.7       12.5        5,484,549      -0.8
L.A. County Total            13.0       12.8       21,273,179      +0.2

Source: Grubb & Ellis Co.

Activity is also picking up in the earthquake-damaged San Fernando Valley, according to Matt Hargrove of Cushman & Wakefield. "We are probably eight to 12 months from seeing a real increase in business activity," Hargrove conceded. "But when we do, that will increase industrial absorption levels."

Industrial activity in the central San Fernando Valley corridor and up to Santa Clarita is pretty good right now, said Doug Sonderegger, a first vice president at the Sherman Oaks office of CB Commercial. "Across the board -- in the San Fernando Valley and expansion markets -- rents have begun to stabilize this yea after pretty substantial drops over the past couple of years," he said.

Bennett Robinson of CB Commercial said he believes industrial activity in the first half of 1994 was up due to the earthquake. "Demand has decreased since then, and is back to normal level," he said. "Some of the people who stayed on the fence during the first quarter leasing boom right after the quake came to market in the second."

Barbara Emmons of CB Commercial said her firm recently leased out the remaining 100,000 feet of the 1.8 million-square-foot Grand Central Business Center in Glendale.

Meanwhile, CB Commercial's first-half leasing activity in the Calabasas-to-Newbury Park "technology corridor" was up 83 percent over the firs half of 1993, and rates have started moving up there, according to Nick Gregg o CB. Because of increased demand and a lack of supply in all size ranges, Gregg predicted industrial construction will soon start up again in the Conejo Valley

The South Bay industrial market experienced more than 4.4 million square feet o properties leased or sold in the second quarter. "We haven't seen numbers like those since 1989," raved CB Commercial's Kirk Johnson. "This has decreased the supply of Class A product considerably, resulting in an approximate 10-percent rise in lease rates." Scott Peters, another CB industrial broker, said he anticipates the second half of 1994 to be more active than the first half, in terms of South Bay industrial leasing activity.

Among the significant industrial deals closed in the second quarter were:

* GATX Inc. leased a new 300,000-square-foot "spec" warehouse at 19705 E. Business Parkway in the City of Industry from Majestic Realty Co. That three-year lease is valued at $3.24 million.

* Chronos Distribution, which distributes cans for Reynolds Metals and is relocating here from Phoenix, leased a 200,000-square-foot warehouse and distribution facility at 4900 Alexander St. in the City of Commerce for three years from Trammel Crow Co.

* Garment manufacturer BCBG bought a 175,000-square-foot manufacturing facility in Vernon from Central Life of Iowa.

* K and F Group, an Asian general merchandise company, expanded and relocated from El Monte into a 155,200-square-foot building at 15620 Valley View Ave. in the City of Industry. The three-year lease is valued at more than $1.5 million.

* Swat/Fame, which manufactures and distributes children's apparel, has subleased a 154,000-square-foot warehouse at 16425 E. Gale Ave. in the City of Industry. The building, located across the street from Swat/Fame's distribution facility, is being subleased from Stoody Co. for 50 months in a deal valued at $1.73 million.

* Snak King, expanding and relocating from Pico Rivera, bought a 140,000-square-foot facility at 16150 Stephens St. in the City of Industry from PJB Investments of Detroit for $3.5 million.

* Top Value Markets, a discount market chain, is moving from Long Beach into larger (126,000-square-foot) warehouse, distribution and office facility at 124 E. Watson Center Road in Carson. The $4.46 million lease from alcohol distributor Simon Levi includes $350,000 in tenant improvements.

* Alflex Corp., which manufactures and distributes metal conduits, is expanding from Rancho Dominguez into a 113,183-square-foot facility at 20250 S. Alameda St. in Carson. The $3.94 million lease, from The Bacon Trust, includes $200,000 worth of improvements amortized over the 10-year lease term.

* Citibank sold a two-story, 107,000-square-foot research and development building occupied by Hewlett-Packard and Candle Corp. at 5601 Lindero Canyon Road in Westlake Village to a local investor for more than $8.5 million.

* Aviall Inc., an aerospace company that moved to Texas, leased a 103,000-square-foot Burbank structure to Physicians' Clinical Lab for 10 years in a deal worth $6 million.

* Textile importer Peyk International bought the 90,000-square-foot building at 4820 E. 50th St. in Vernon, next door to its pre-existing facility. It plans to rehabilitate the structure as a distribution facility. Dunitz Partners sold the building for $1.2 million.