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December 9, 2023
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South Bay

Welcome, Executive Subscribers, to another SpaceJamz report, where we take a cybertour of big blocks of available space. Mostly office space, with some industrial sprinkled in. In this report we revisit the South Bay, which we last did in this report about a year ago, and boy a lot has changed, mostly for the negative, as many new projects have come online since then, mostly in El Segundo, and not much of it has been leased, as you will read about below.

For those not in the immediate area, the South Bay area of the LA basin is a geographically vast and diverse region covering most of southwest LA County. As we noted last year, the region continues to evolve from being dominated by a few huge aerospace and defense players into one that is a breeding ground for smaller companies in a variety of tech-related fields. Certainly a couple of years ago this transition seemed like it was moving quickly, but like the rest of the "new" economy, it slowed to a halt in 2000. It is still those big companies that are the biggest space users in their respective markets, as Hughes, DIRECTV, Boeing, Northrop, Toyota, and TRW still dominate the space scene.

The area is broken down into roughly the following markets: Los Angeles International Airport (LAX) area, El Segundo, the 190 th Street Corridor, Torrance, the Beach Cities and Long Beach / San Pedro. According to recent numbers from Insignia/ESG's mid-year report, the South Bay contains 35 msf of office space, of which 17.46%, or 6.07 msf, is now available. This vacancy is the result of a harsh past 12 months, leasing-wise, for the region, as there was 1.04 msf of negative absorption during the period, which jacked up the vacancy three percentage points. The most glaring stats are from LAX, with a vacancy of 30% on 3.5 msf, and El Segundo, which had negative 512k sf of absorption in the past year, bumping that submarket's vacancy rate up 5.3 points. In the case of LAX the vacancy is pretty much the same old, same old, but in El Segundo's case, most of that vacant product is brand spanking new, so great opportunities abound for the company in need of quality space. Average asking rents are about $1.40/sf/mo FSG in the LAX area, and $2.40/sf/mo FSG in El Segundo.

Most of the submarkets in the South Bay, such as Hawthorne, 190 th Street and Torrance, threw another project or two onto this report, but Downtown Long Beach actually had a few removed, as some of the bigger blocks were chipped away by leasing activity here. While the Insignia/ESG report states the Downtown Long Beach vacancy at 19%, it seems that most of the class A towers along Ocean and Oceangate have lots of little spaces available, and not many of several floors. The average asking rate there is just under $2.00.

For some variety, and because we love really big spaces, we included a couple of the large industrial spaces now available, namely Lowe's building at The Exchange in Hawthorne, and the tremendous Port Los Angeles Distribution Center down in San Pedro. According to a mid-year report from DAUM Commercial Real Estate Services, the industrial markets for the South Bay, including Carson and Rancho Dominguez contain 230 msf, of which about 4.5% is vacant, which is up about 0.3% from the previous quarter and up from the low point of about 3.2% in the 3Q 2000. Those numbers are not bad by any stretch. We all know leasing activity has been down, but new construction for industrial space, which is much more responsive to downturns, was cut back as well, so the market remains pretty healthy, with average rental rates showing only minor softening, to around $0.57/sf/mo NNN. Asking rates for R&D space is now at about $0.82/sf/mo NNN. Of course, actual deals getting done may be a bit less than these rates, as every landlord knows now is not the time to lose a deal. Nonetheless, if activity starts picking up, these industrial submarkets could quickly become very tight again.

So enough of the overview, and let's get on with the tour. Listed below are 28 properties that, for the most part, have blocks of at least 50k sf that are vacant and available. They represent a variety of makes and models and prices and conditions, but that's what makes our job fun.

So starting north at LAX and heading south, here are some of the biggest blocks of space now available in the South Bay.


GARDENA: The Building Previously Known as ANDREX POINT, 879 W. 190th Street:
This building has been a mainstay on the past few South Bay SpaceJamz Reports, and many brokers in this market will tell you that is largely because the longtime owner Hyundai Merchant Marine (America) Inc was said to be difficult to deal with. But now those days are over, since at the end of July, 2002, Hyundai sold the asset for $28.5 mil, or $113/sf to a group called Commercial Ventures, which has been active of late buying office buildings in the 190 th Street corridor. The 12-story asset is comprised of a 247k sf office building plus the 6k sf Paradise Cafe restaurant building. The blue-ish, stepped, high-rise was built in 1989 and is located right at the intersection of the 405 and the 110 Freeways. There is about 110k sf available throughout the building, consisting of the entire sixth and seventh floors (22k sf each), 11k sf on nine, and 18k sf on both 11 and 12. Grubb & Ellis' Kevin Shannon, Chris Sinfield and Bill Maher repped both sides in the sale, and now the Grubb & Ellis team of Sinfield, Maher, and recent G & E addition Phil Mattice take over the leasing listing from Cushman & Wakefield. We don't know what the new marketing fellas will be asking for a rental rate, but we can tell you the asking rate until now has been $1.90/sf/mo FSG. The surface parking comes in at 4/1000 and it's free.

TORRANCE: 2545 W. 190th Street:
Heading under the 405 Freeway west a few blocks from Andrex Point, mentioned above, just west of Van Ness, amidst the Mobil Oil Refinery and the Oil Tanks, are a strip of office buildings along 190 th St, of which this is one. It contains 230k sf over two stories, of which 165k sf is available for an asking rate of around $1.45/sf NNN. The building was built in 1960 and is owned by Mar Canyon Gersten, which has put some money into the building in the form of new mechanical and HVAC systems. MCG has enlisted the marketing and negotiating services of Stephen Cramer and Mona Dube from Colliers Seeley International to lease up the building, which comes with parking at a 3.3/1000 clip.

TORRANCE: 20770 Madrona Avenue:
This modern, 240k sf, three-story building near the intersection of Carson St, now is sporting about 211k sf of available space, formerly occupied by Internet Connect, who occupied the building about two years ago after it was vacated by its long-time tenant, Epson. The first-class, Gensler-designed facility was built in 1990 and is now owned by Southwest Value Partners. They are quoting $1.85/sf/mo NNN and can split the space. The all-surface parking ratio is 4/1000 and it is free of charge. Marketing the space for the landlord is the CB Richard Ellis team of Tim Vaughn, Dave Smith and Grafton Tanquary.

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