Massive Absorption As Buildings Are Completed
South Bay remains the premier market for distribution companies and sea and air cargo centered industrial users. It is nearly fully developed so land is incredibly scarce. Tight market conditions and a lack of larger modern space continue to be deterrents that drive tenants to neighboring markets, primarily to the east.
There were 1,314,500 SF of construction completions this quarter as the much-anticipated Brickyard project finished completion.
Much of the industrial space that was completed this quarter was pre-leased, leading to a massive 1,356,400 SF of positive net absorption this quarter. This is the largest net absorption in a single quarter since 2004.
Sales and leasing activity totaled 3,310,500 SF, broken out into 9 sales (246,500 SF) and 55 leases (3,064,000 SF).
Average asking lease rates increased by $0.01 PSF NNN over the quarter to end at $0.75 PSF NNN, a new record rate.
There is 1,177,000 SF of new space currently under construction which will finish in the next 12 months.
Tight market conditions are expected to persist in the South Bay industrial marketplace with vacancy rates below single digits expected in future quarters. Rents are at their highest ever levels, prompting many users to consider buying their properties, however the available inventory is insufficient to meet demand.
Land is incredibly scarce and many industrial users are having to get creative or face paying a premium to secure land for truck, car or trailer storage.