Large industrial deals dominate San Gabriel Valley in 2nd quarter.

Leases and sales of large industrial buildings continued to account for the biggest deals in the San Gabriel Valley during the second quarter. But much of the big industrial spaces are now leased, and brokers foresee a filling-in of smaller spaces in the future.

Also during the second quarter, construction began on 116 homes in Rowland Heights and a 40,000-square-foot community shopping center in Monterey Park.

Typical of the deals that have been driving the San Gabriel Valley market durin the past two years was Majestic Realty Co.'s lease of a 300,000-square-foot building at its 200-acre Fairway Business Center in the City of Industry to GAT Inc., a contract warehouse company.

Majestic completed construction in December on the building, which was one of the few speculative projects built in the San Gabriel Valley in several years.

Kent Valley, ownership representative for Majestic, said GATX now leases a tota of 1.6 million square feet in the Fairway Business Center. Valley said GATX is typical of the types of users that have leased and bought huge warehouse facilities in the San Gabriel Valley in recent years.

In another industrial deal, Pico Rivera-based snack food manufacturer Snak King Corp. bought a 140,000-square-foot building in the City of Industry for $3.5 million to serve as the company's new headquarters.

Jim Center, a Grubb & Ellis Co. senior vice president who represented the seller, Detroit-based PJB Investments, said the continuing demand for industria spaces has depleted the available supply in larger size ranges and is beginning to reduce the supply in some of the smaller size ranges.

"Generally, the larger you go, the tighter the space is," Center said. "It used to be that anything above 200,000 square feet was tight. Now it's more like 150,000 square feet and above, or maybe even 100,000 square feet."

He pointed out that the space has filled up gradually over the past four years, during which time there has been "no significant construction." Much of the space was on the market for three or four years before it was leased, he said.

Center said the dwindling supply of large spaces has led to a corresponding reduction in landlords' generosity. "We're seeing much less in concessions," he said. "A couple of years ago, the landlords were giving a month of free rent fo every year of the lease. But now we're not seeing any more than two months of free rent, regardless of the length of the lease."

Tenants are still being cautious, he noted, so most lease terms are still no longer than five years.

Despite the general improvements in the market, however, Center added that leas rates and terms still depend primarily on "the functionality of the building." Distributors want buildings with higher ceilings, modern sprinkler systems and loading docks, and other state-of-the-art features. So low rent alone may not b enough to fill some of the less desirable buildings.

"There are still some older properties available that are not state-of-the-art that have lower ceiling clearances, or that don't have modern loading docks or sprinkler systems," he said. "The rents are still being discounted on them, but the rates are firming up for the newer, larger space that is fully functional."

According to Grubb & Ellis, the second-quarter industrial vacancy rate was 9.23 percent in the San Gabriel Valley, compared with 10.5 percent at the end of the second quarter of 1993 and 9.94 percent at the end of the first quarter of this year.

A new trend in the industrial market this year, according to Center, is increasing demand from smaller companies and manufacturers, while most of the 1993 deals involved large distributors. Among these smaller sales was the $1.3 million purchase in May of a 42,000-square-foot building in Monrovia by Food Maker's Equipment, a distributor of bakery equipment. Rick Sheckter, a Grubb & Ellis vice president who represented Food Maker's, said the company is expandin and moving from leased space in South El Monte.

According to Valley, the same increase in small-tenant activity was reflected i the leases Majestic got signed during the second quarter. Of 13 industrial leases Majestic transacted during the second quarter, 10 were for between 15,00 and 60,000 square feet of space, while one was for 92,000 square feet, another was a renewal for 260,000 square feet and the last was the GATX deal.

"We've have had quite a few smaller companies looking at space, including quite a few Chinese companies," said Valley, who noted that four of the 10 small leases were to Chinese firms. "The brokerage community here is well aware of th increasing importance of the Chinese in our market. There are also Chinese brokers here handling some of the transactions, and they have bought some small lots for build-to-suits," he said.

Valley added that Chinese tenants in the San Gabriel Valley represent "a wide range of businesses, everything from computers to clothing manufacturing." For example, a firm called Minmetals Inc., which leased 52,000 square feet from Majestic in the second quarter, imports brake rotors. Two other second-quarter Majestic deals involved Amtrail and Pali Fashions Co., which leased 50,000 and 16,000 square feet, respectively. Both those companies are clothing manufacturers.

A company called Precision Composites International, which works with space-age composite materials, leased 15,000 square feet from Majestic in the second quarter.

Compared with its industrial market, San Gabriel Valley's office market was fla in the second quarter.

According to Tim Cullen, director of leasing for Majestic Realty, lots of companies looked at space but leasing was flat during the second quarter, and most of the deals were small. "There was a lot of activity, but not a lot of it translated into deals," he said.

Cullen said the second quarter contrasted with the first quarter. "We had a pretty good first quarter when we brought in the State of California Board of Equalization on a 28,000-square-foot lease at Crossroads Business Park" in the City of Industry, Cullen said. Overall during the second quarter, he said, "I think the Class A properties in the San Gabriel Valley have been holding their own quite well. Most of them probably have occupancy rates in the mid-80-percen range."

Elsewhere in the valley, new residential development took place in the quarter at Ridgemoor Crest, a residential development of Irvine-based Akins Homes Inc., and new retail development took place at Monterey Park Village, an $11 million shopping center to be owned and operated by Majestic Realty.

Ridgemoor Crest, which is planned to include 116 single-family homes, is the first neighborhood to be built in the 277-acre Ridgemoor development in Rowland Heights. The Ridgemoor development, which is designed to eventually contain 510 homes in four neighborhoods, is being master planned and developed by Akins in affiliation with San Francisco-based Rockefeller & Associates Realty, which was founded by Rockefeller heir and businessman David Rockefeller.

Sales of the homes, which are to be priced in the mid-$200,000 range, are expected to begin later this year. Akins officials said they chose the site in large part for Ridgemoor's central location in relation to Los Angeles and Orange counties and the Inland Empire. The site is southwest of the intersectio of the Pomona (60) and Orange (57) freeways, about 20 miles from downtown Los Angeles and 20 miles from Ontario International Airport.

The shopping center, next to East Los Angeles College in Monterey Park's redevelopment area, is on 3.5 acres at the intersection of the Pomona (60) Freeway and Atlantic Boulevard. Scheduled to be completed in September, it is a development of Monterey Park Village Associates, a partnership in which Majesti is general partner and The East Los Angeles Community Union, commonly known as TELACU, is a limited partner.

Brook Morris, director of retail development for Majestic, said the center has leased 16,000 square feet of space to The Good Guys, 15,000 square feet to Towe Records, 5,000 square feet to Community Thrift & Loan and 2,000 square feet to Taco Bell.