South Bay, Long Beach vacancies soar as aerospace flight continues.

South Bay, Long Beach vacancies soar as aerospace flight continues

Aerospace companies have vacated millions of square feet in the South Bay and Long Beach, causing office vacancy rates in those communities to soar, according to commercial real estate brokers.

Meanwhile, residential brokers from Hermosa Beach to Cerritos report optimism that buyers are ready to make some serious offers now that the Persian Gulf War is over.

Vacancy rates "in parts of El Segundo and the 190th Street area is as high as 31 percent," said Bruce Schuman, vice president at Julien J. Studley, who specializes in South Bay commercial leasing. A major reason for the high vacancy rates is down-sizing by aerospace companies, which dominate the South Bay business scene.

One of the aerospace companies, Hughes Aircraft Co., has vacated 800,000 to 1 million square feet of office space in the past two years, said Richard Dore, manager of media relations for Hughes. Currently 650,000 square feet of the vacated space is on the market for sublease, Dore said.

"We look at that space as being space that might some day be available for other corporate users," Schuman said.

Another aerospace firm, Rockwell International, will move its headquarters in December, vacating 110,000 square feet in a building the company was in since 1975, said Carl Nordquist, director of facility engineering and support services. The company decided it would be more economical to move into recently available space at its Seal Beach facility, Nordquist said.

While Studley brokers predict that the commercial office space market on the Westside will "turn around" in about a year, the South Bay may need a longer recovery period, Schuman said. "The South Bay has got to be a two or three year picture," he said.

John Ayoob, association vice president at Coldwell Banker's South Bay Regional Office, agrees that aerospace company downsizing has had a major effect on the South Bay market.

Vacancy rates are somewhere near 31 percent on Century Boulevard, Ayoob said. In early 1990, El Segundo was enjoying a vacancy rate of 6 to 7 percent, but it soared to 16 to 17 percent in early 1991, mostly because of aerospace companies vacating space, Ayoob said.

Vacancies in the El Segundo area may have been even higher, except for the fact that a number of different industries have recently moved offices to the El Segundo area, Ayoob said. Computer companies, such as Sun Microsystems; airlines, such as American Airlines; and toy company Mattel have recently relocated to El Segundo, Ayoob said. Still the aerospace defections hurt.

Schuman said that the South Bay also has been hurt by overbuilding in anticipation that Westside tenants who didn't need the glamour of a Westside address would move to the more affordable South Bay. But with Westside buildings offering low rent and lots of concessions, tenants did not make the move south, Ayoob explained.

Ayoob said the South Bay may have a bright future, eventually. "The South Bay in the next 10 years is the direction the city is going to move," he said.

The Long Beach area is also suffering from high vacancy rates, which can be partially attributed to aerospace giant McDonnell Douglas vacating space, said Gregg Kirkpatrick, senior sales consultant with Coldwell Banker, who specializes in Long Beach office space.

Vacancy rates in the suburban Long Beach office market have risen from about 17 percent to about 20 percent in the past year, partially because McDonnell Douglas has vacated space, Kirkpatrick said.

In addition, the downtown Long Beach office market is suffering from vacancy rates of about 21 percent, Kirkpatrick said. The high vacancy rate has been caused partially by the fact that three new office buildings representing 1.3 million square feet of space - Shoreline Square, Landmark Square and the Greater L.A. World Trade Center - have come on to the market in the last few years.

Meanwhile, residential real estate agents covering the area south of Los Angeles report that sales are picking up noticably since the Persian Gulf War ended. However, mortgages on new home sales and resales in January and February 1991 don't compare well to figures for February 1990, according to TRW Data Services.

For example, in Long Beach, mortgages for new home sales and resales totaled $42.7 million in January and $43.3 million in February. In February 1990, mortgages totaled $62.2 million.

In the Hermosa Beach/Manhattan Beach/El Segundo area, mortgages on new homes and resales totaled $11.8 million in February 1991 and $13.4 million in January 1991, down from $18.5 million in February 1990.

Manhattan Beach-based RE/MAX Beach Cities Realty, the largest residential broker in the South Bay, said there has been a "distinct" difference in buyers' attitudes since the war ended. He noted that TRW mortgage figures do not reflect current home sales because there is a 30- to 45-day escrow period on standard purchases.

The effect of the post-war boom is real, he asserts. "The effect of February will be seen in April. You'll see it," Todd said.

RE/MAX had sales volume of $60 million in February and $50 million in January, compared to only $30 million in December, when buyers were walking around "with their hands in their pockets," Todd said.

Gary Bingaman, president of the Rancho Los Cerritos Board of Realtors, which represents residential brokers in the areas of Artesia, Bellflower, Cerritos, Lynwood, Compton, Hawaiian Gardens and Paramount; said homes in the over $200,000 range are now moving. Prior to the war's end, virtually the only homes that sold were in the below $200,000 range, Bingaman said.

"There's a home I had on the market for eight months and it sold right as the war was ending. Before, we couldn't get anyone to look at it." Bingaman said. "At the open houses we were having, if you had one or two (visitors), you'd be lucky. And now there is a steady stream of people."

Richard Gaylord, president-elect of the Long Beach District Board of Realtors and a broker with Choice Pacific Properties, said he has noticed more serious buyers emerging since the gulf war ended.

Three weeks before the war ended, Gaylord had 20 offers on 14 pieces of property, none of which was acceptable to the sellers. In the first two weeks after the war ended. Gaylord said he had three properties in escrow.

Gaylord said he now has 32 listings, compared to 21 at the same time last year, but he is optimistic about the future.

According to TRW figures, mortgages for new home sales and resales on the Palos Verdes Peninsula and Catalina Island totaled $11.9 million in February 1991, up from $9.3 million in January 1990. But mortgages in the area totaled $18.5 million in February 1990.

In the Lakewood-Hawaiian Gardens area, there were $6.4 million in mortgages recorded in February 1991 and $8.2 million mortgages recorded in January 1991. There were $6.5 million in mortgages in the area in February 1990.

Torrance had $17.1 million in mortgages in January 1991 and $13 million in February, compared to $28.1 million in February 1990.

Redondo Beach had $11.5 million in mortgages in January 1991, $13.3 million in February and $20 million in February a year ago.

The Inglewood/Lennox/Morningside Park area recorded a total of $11.9 million in mortgages in January 1991, $10 million in February 1991 and $14.2 million in February 1990.