Record High Rents On Strong Fundamentals

The Los Angeles Basin industrial market is the largest market in the United States, totaling over 1.56 billion SF. It also has some of the highest asking rental rates as well as one of the lowest vacancy rates of any market in the US. Major industrial drivers for the region continue to be imports at the twin ports of Los Angeles / Long Beach, which handle roughly 40% of all imports into the country. In addition, the region is the largest manufacturing center in the United States, with more manufacturing jobs than the entire state of Illinois.

Key Takeaways:

  • The Greater Los Angeles Basin industrial market absorbed 4,256,600 SF of industrial space this quarter with uneven gains by region. Absorption was highest in the Inland Empire at 3,504,800 SF, Los Angeles County had positive net absorption of 1,190,400 SF while Orange County reported negative 438,600 SF of net absorption.

  • This quarter there was 4,587,400 SF of industrial space added to the base. Despite the current construction boom taking place, actual construction completions are below the quarterly completion average of 5 million SF seen since 2013.

  • Asking rents rose to $0.66 PSF NNN, the highest reported rental rate for the Greater Los Angeles Basin.

Submarket Overview:

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. There remains 839,300 SF of space under construction in the San Gabriel Valley, a tight infill market with few opportunities to develop additional industrial space. As market conditions remain tight in Orange County and quality industrial space remains scarce, asking rental rates are expected to rise by another 5% to 10% by the end of 2018. Demand remains strong and continues to outpace supply in Inland Empire. This is leading to increased construction for large modern distribution centers, driven largely by E-commerce companies further expanding their industrial footprint.