The Vernon City Council passed a resolution to increase the Special Parcel Tax rate from $.20 to $.22 per square foot of land. Expect annual increases of two cents. It applied to properties containing non-refrigerated warehouse uses, truck and freight terminal uses and other distribution uses.
Recession Amid Economic Growth?
Are we in a recession? Maybe, maybe not. The U.S. economy is expanding and is likely to show a 2% annual growth rate this Thursday. Picture taken from today’s WSJ article.
City of Vernon Purchases 11 Acre Site – To Redevelop
The City of Vernon recently acquired the 11 acre Smurfit-Stone (formerly Container Corp) site on 57th Street, after the container manufacturer decided to close the Vernon plant and consolidate operations into other facilities. The City expects to have a contractor demolishing the existing facilities on the site beginning later this month. The City’s Industrial Development staff is currently in discussion with several large manufacturers about future use of the site.
The City has purchased several large land sites over the past several years in order to control the destiny who occupies the sites. The City prefers companies that manufacture, employ more persons than warehousing operations, and that use copious amounts of the power that the City sells. This interference by the government in the free market of real estate deals definitely rubs some people the wrong way.
Lease Activity Overshadows Sales
In the 2008 second quarter, 3.5 million square feet of building space was absorbed in the Central Los Angeles industrial market, similar to Q2 ’07. Here is the interesting point: space leased totaled 2,800,000 SF versus a paltry 751,000 SF sold – almost a 4:1 ratio. The credit crunch and high sale prices have surely placed a damper on the sale market even though sale prices are relatively stable.
Industrial Activity Slow But Steady
The Southern California industrial market continues to exhibit consistent demand for tenant space and strong occupancy levels. The five-county area, which consists of approximately 1.7 billion square feet of industrial space, maintained a low vacancy rate averaging approximately 3%.
The economic climate is posing many challenges to the Los Angeles county as well as the Industrial Market;p however, the fundamentals remain in place for strong performance in the marketplace.
Capitalization Rates for industrial investment properties hovered just below six percent. Vacancy remains low in the 3-5% range, but several points higher in the Inland Empire. Many brokers have seen a 20-30% decline in transaction volume and demand.
More specifically, Gross Absorption is 50% compared to a year ago, with 2008 Q1 at 2.2 million versus 2007 Q1 at 4.1 million for the Central Los Angeles area. The Central Los Angeles Market is the largest industrial base in Los Angeles County. The Central Market remains one of the tightest and strongest submarkets in the region with little if any new construction due to the high cost and low availability of land.
To some degree, reduced container traffic has contributed to the diminished demand. Containers handled at the ports of Los Angeles and Long Beach were down 5.6% and imports sunk 5.9%, while exports increased 22%. Lease rates have held steady though. Â Although, tenants are demanding more concessions in the form of free rent and tenant improvements.