Lease, Sales of South Bay Factory Space Surge 15% : Manufacturing: Falling prices and greater supply fuel the takeoff during the first half of the year. But the industrial vacancy rate inched upward over 1992 figures.

As aerospace cutbacks and corporate liquidations worsen the South Bay’s glut of vacant industrial space, brokers have found a bright side.

The amount of factory and warehouse space in the South Bay sold and leased has jumped 15% in the first half of this year, with buyers and tenants lured by low prices for space once out of their reach, according to the Torrance office of Grubb & Ellis Co., the San Francisco-based real estate brokerage firm.

About 4.5 million square feet of South Bay industrial space was sold or leased in the first six months of 1993, compared to 3.5 million square feet in the same period last year, Grubb & Ellis recently reported.

Brokers attribute the increased sales and leasing to falling prices and a greater supply of industrial space brought on by cutbacks in aerospace and other defense-related businesses and the flight of recession-weary manufacturers from the region.

But economists doubt that any of the new types of businesses moving in will match the high-paying manufacturing jobs lost by aerospace companies. About 80% of the aerospace jobs that have been lost paid $15 an hour or more, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., a nonprofit group that supports efforts to strengthen the area’s business climate.

“It’s not easy to find many jobs to get over that,” Kyser said.

And, despite the uptick in sales and leasing, the industrial vacancy rate in the South Bay still rose from 13% a year ago to 13.6% in the first half of this year.

What’s more, brokers say that the fallout from aerospace cutbacks hasn’t been fully felt because many firms that have left the area still occupy buildings because of unexpired leases. Once they go, building owners will have to continue to bite the bullet and accept lower rents if they want to woo new tenants.

“They have no choice,” said Terry Reitz, senior vice president of Grubb & Ellis. “They can’t fight the market.”

But some building owners are fighting the market--and in some cases succeeding--by slashing leasing and sale prices.

“The pricing is the key,” Kyser said. “(Companies) who would normally look in Riverside and San Bernardino will look in this area because prices are so cheap.”

For example, in 1989, leasing a 50,000-square-foot building in Carson or nearby Rancho Dominguez would have cost 34 cents to 37 cents per square foot, plus expenses, according to Grubb & Ellis. Now, a tenant could get the space for 25 cents to 30 cents, plus expenses.

The decline in sale prices has been even more dramatic, from 50 cents per square foot to as low as 30 cents.

“It’s an active market,” said Tres Reid, a broker at CB Commercial Real Estate Co. in Torrance. “People are scrambling to make deals. If anyone’s breathing, there’s five brokers there.”

The apparel industry has been key in taking advantage of the lower sales and rentals, raising hopes among brokers and business leaders that the manufacturers will fill a significant part of the void created by the loss of the aerospace firms.

“Most (apparel manufacturers) are coming to the South Bay from the downtown area,” said Reitz of Grubb & Ellis. “There’s security, more modern facilities and more room to expand.”

“Downtown L.A., since the riots, is still considered unsafe,” said Jim Scofield, a vice president at The Seeley Co. and specialist in the South Bay’s industrial market.

Maybe so, but it was the South Bay’s access to transportation hubs that helped Bugle Boy decide to locate an apparel printing and distribution center in Rancho Dominguez, said company spokesman Arnie Karr. The Simi Valley company leased about 206,000 square feet of space in Rancho Dominguez in December, 1991.

In the past 18 months, B.U.M. Equipment, Beach Patrol and Contempo Casuals have leased or bought more than 600,000 square feet of industrial space in the South Bay.

Last week, Texollini Inc., a Vernon manufacturer of knitted and woven goods and Lycra fabrics, paid $4 million for a 196,000-square-foot building in Carson that previously housed a stereo components distributor.

“It was priced right, and we went from there,” said John Bowman, president of J.W. Lewis Co., a Cerritos real estate firm that helped the company find the site. “A few years ago, you were probably talking about (a price that was) 40% to 50% more.”

Business leaders, meanwhile, say that apparel manufacturers could move to the South Bay in droves if the movement to lure the bulk of tenants in downtown Los Angeles’ apparel mart to the proposed 700,000-square-foot Fashion City in Hawthorne is successful. Garment wholesalers would sell their wares to buyers for retail outlets across the country.

Although no manufacturers would be housed in the facility, proponents of the project say that it is likely they would want to be within close proximity to where their wares are sold.

“We would hit a home run if that happened,” said broker Reid.

Aside from the apparel industry, freight forwarders, movers and related services have also found the South Bay desirable and cheap.

Last month, Bekins Box & Ship moved its corporate headquarters and several Los Angeles area warehouse operations into a 40,000-square-foot building on Maple Avenue in El Segundo.

Bekins, which has 60 employees, chose the site for its proximity to Los Angeles International Airport and the Port of Los Angeles. El Segundo’s low crime rate also played a role, said Mark Tennenbaum, chief executive officer of Bekins, which operates a chain of retail outlets for packaging and shipping.

But price made the move possible.

“I could have been in a place like Arcadia for the same price,” Tennenbaum said. His company signed a five-year lease valued at $930,000. Hughes Aircraft Co., the building’s previous occupant, “was paying quite a bit more for the space,” Tennenbaum said.

He added: “The air is clean, Manhattan Beach is just a stone’s throw away, and it’s a heck of a lot nicer than being in an industrial area.”

Space Chase Industrial vacancies in the South Bay have increased, but declining property values and rental rates are starting to attract new occupants. Table shows how the amount of sold and leased industrial space in the South Bay and several adjacent communities was generally higher in the first half of this year than in the first six months of 1992.

AREA: LA Airport/El Segundo SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1993: 283,169 SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1992: 443,267 AREA: Torrance/Harbor City SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1993: 689,113 SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1992: 308,180 AREA: Hawthorne/Gardena SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1993: 278,821 SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1992: 178,612 AREA: Carson/Compton/Rancho Dominguez SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1993: 2,873,496 SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1992: 2,276,417 AREA: Wilmington/Harbor SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1993: 100,720 SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1992: 59,595 AREA: Long Beach/Paramount SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1993: 267,796 SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1992: 310,266 SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1993: Total: 4,493,565 SQUARE FEET OF SOLD AND LEASED INDUSTRIAL SPACE, Jan. 1-June 30, 1992: Total: 3,576,337 Source: Grubb & Ellis Co.