California Apparel News

Despite a slight uptick in interest rates during the second half of 2003, the California retail and commercial real estate market held firm this year.

Rental and sales rates have been inching upward. Construction activity has been strong in both retail and industrial warehouse markets.

The driving forces behind this are volatility in the equity market and reasonable interest rates, according to New York–based commercial real estate services firm Cushman & Wakefield Inc.

Rents in prime retail markets such as Rodeo Drive in Beverly Hills have climbed about 20 percent in 2003 over the previous year, to an average $22 per square foot per month. Choice locations along Rodeo Drive are commanding $25 per square foot per month, said Bruce Dembo of Dembo & Associates in Beverly Hills.

Other popular shopping areas have also experienced rent growth, but at a 3 to 5 percent rate increase, according to Sauve Riegel Commercial Real Estate in Pasadena, Calif. Rents in Old Town Pasadena have inched up to $5 per square foot per month while Lake Street and other sections range from $2.50 to $3 per square foot.

On trendy Melrose Avenue in Los Angeles, rents averaged $3.50 per square foot, according to Beverly Hills–based Sachse Real Estate.

Steady commercial market

Warehouse and industrial real estate has stayed strong due to new construction and demand for modernized distribution facilities. Lower interest rates drew more manufacturers and distributors to buy rather than rent.

For apparel manufacturers and importers, the more popular markets continued to be the Vernon/Commerce corridor, the Inland Empire and the South Los Angeles/ South Bay regions.

Vacancy rates in the Central Los Angeles market, including the Vernon/Commerce corridor, fell to about 4.8 percent from a yearly high of about 5.6 percent, according to Cushman & Wakefield. Rents fluctuated from 46 cents to 50 cents per square foot. In the South Los Angeles/South Bay regions, rents ranged from 50 cents to 54 cents per square foot and vacancy rates were flat at 4.3 percent.

But a fall-off in manufacturing jobs industry- wide has resulted in slower leasing activity in some areas, such as the Inland Empire, where more than 5,000 manufacturing jobs have been lost over the past two years, according to a recent report issued by the Los Angeles County Economic Development Corp. Still, lease rates remained flat there, at about 35 cents per square foot there, though vacancy rates have fallen to 9 percent from a year high of 11 percent. —Robert McAllister