Small Deals Fail to Heat Up High Desert Real Estate Industry

The Antelope Valley industrial market remained weak and continued its pattern of small transactions in the fourth quarter, as larger deals eluded developers and brokers. Some 26,100 square feet of space was taken off the market as landlords dropped average asking rents 2 cents to 44 cents a square foot. The positive net absorption, though, wasn’t reflected in the vacancy rate, which increased marginally to 4.4 percent, according to data from Colliers International. Brokers in the area, however, are at least optimistic, anticipating more activity this year. Dennis Marciniak, vice president in the Woodland Hills office of Daum Commercial Real Estate Services who handles industrial property in the Antelope Valley, said he has talked with at least one developer looking for vacant land with the prospect of putting up industrial buildings on spec. And there is talk of other developers doing the same. “With the lack of product there are people starting to think in terms of that,” Marciniak said. A big question mark remains the future of the 130,000-square foot-building in Palmdale formerly occupied by manufacturer Senior Systems Inc. until it went out of business in 2012. A South Korean wind turbine company has expressed interest, as has a Chinese manufacturing company that has done a walk-through, he said. “There have been some local (businesses) and some from the Los Angeles area that are looking at the building also,” he added. There was one huge positive development in the quarter: a resolution to the lingering labor dispute involving Kinkisharyo International, a Japanese manufacturer that has an $890 million contract to build rail cars for the L.A. County Metropolitan Transportation Authority. The company had plans to construct a $50 million, 400,000-square-foot plant on 60 acres in Palmdale, but opposition from labor and community groups delayed the project long enough that Kinkisharyo started looking for a location out of state. Then in November, after intervention by L.A. Mayor Eric Garcetti, who chairs the Metro board, Kinkisharyo announced it would lease hangar space from Los Angeles World Airports in Palmdale for manufacturing the rail cars. The company already leases space from LAWA for final assembly of cars with parts shipped primarily from Japan. Charles Hoey, a long-time Antelope Valley broker with Charles Hoey and Associates, said he is involved with two new building projects, one at the Lancaster Business Park, the other in Palmdale. The Lancaster project already has a tenant interested in taking an entire 24,000-square-foot building, though not for an industrial use. At the Fairway Business Park in Palmdale, Hoey brokered a lease deals for two small breweries, one taking a space of 4,500 square feet. The two owners are friends with each other and it’s a coincidence they opened nearby each other, he said. “I will take (clients) like them all day long,” Hoey said. The 1.5 million-square-foot office market, meanwhile, showed some life by absorbing 18,000 square feet after a weak start to the year. That brought the vacancy rate down to 9.4 percent for the quarter, nearly two points lower than the third quarter. Landlords helped out with a willingness to deal, bringing down asking rates 2 cents to $1.77 a square foot. In the retail market, construction continues on a 5-acre center at 730 N. Ranchovista Blvd. in Palmdale will include grocery chain Aldi, Dunn-Edwards Paints and eateries Chick-Fil-A, Krispy Kreme, Yogurtland and The Habit. The center is being built in phases by Fountainhead Development of Newport Beach with the Dunn-Edwards building already completed and occupied. A total of four buildings will be constructed. – Mark R. Madler Main Events Kinkisharyo International, a Japanese manufacturer that has an $890 million contract to build rail cars for the L.A. County Metropolitan Transportation Authority, announced it would expand its leased hangar space from Los Angeles World Airports for manufacturing of rail cars. The company has a five-year lease at 2825 East Avenue P in Palmdale for final assembly of cars with parts shipped primarily from Japan. An office building at 44943 10th Street West, Lancaster sold in November for $206,000 or $100 a foot. The 2,046-square-foot building was purchased by John Massari of Commerce Avenue Partners and sold by Gary Cosgrove. A 1,500-square-foot retail building in Palmdale sold in November to Mario Alvizo and Dora Andaluz, of Sunland, for $340,000. The structure at 38575 Sixth St. East was built in 1962 and sold by Noriko and Takeo Nagano, of Palmdale. PALS in Education LLC leased 1,272 square feet of office space in the CentrePoint Business Park in Lancaster. The property at 1212 W. Avenue J is owned by Martin Properties Inc. in Westlake Village. Construction is wrapping up on the first phase of a 5-acre retail center at 730 N. Ranchovista Blvd. in Palmdale. When completed the center will include a grocery chain Aldi, Dunn-Edwards Paints and eateries Chick-Fil-A, Krispy Kreme, Yogurtland and The Habit. Fountainhead Development, of Newport Beach, paid $4 million for the property. Groundbreaking took place last April. Antelope Valley Industrial Market At a Glance Inventory 7.98 million square feet Under Construction 0 Asking Rents 44 cents