Rents Continue To Rise, Construction On The Way

The San Fernando Valley is the most populous region of Los Angeles and home to the major motion picture, music recording and television production companies. Much of the industrial infrastructure is devoted to ancillary services for the entertainment industry and population serving industrial warehouses. The San Fernando Valley has recently seen an influx of value-add investors continuing to purchase properties in the region.

Key Takeaways:

  • Vacancy was unchanged over the quarter, remaining at 2.1%. The vacancy rate has been gradually declining since peaking at 5.5% in 2011.

  • Asking rental rates increased over the quarter by $0.01 PSF NNN to end at $0.66 PSF NNN. While increasing, rents are still below their peak of $0.68 PSF NNN in 2007.

  • Sales and leasing activity totaled 1,569,300 SF, broken out into 17 sales (565,600 SF) and 35 leases (1,003,700 SF).

  • Net absorption totaled 28,000 SF, essentially flat as supply and demand have remained in balance.

  • Construction has picked up in the San Fernando Valley and a number of projects broke ground this quarter.

Outlook:

Flat market conditions are expected to persist in the San Fernando Valley industrial marketplace with slight upticks in rents continuing in future quarters. We are likely to see investment remaining active as a lack of available product in nearby markets is driving up sales prices throughout the Los Angeles Basin. For industrial users looking to find the ideal space to meet their needs, they will likely have to expand their industrial footprint by taking additional space in soon to be constructed speculative buildings or in build to suit projects as quality space remains hard to find in this market.