Rents Rise & Vacancy Falls To Lowest Rate Ever

The San Gabriel Valley market has surpassed the previous market peak in terms of rents. Exceptionally low vacancy rates and rising rental rates are leading many tenants to consider purchasing their real estate. The vacancy rate has increased 10 basis points to 1.3% as projects have finished construction. Industrial demand reported 187,700 SF of positive net absorption. Industrial demand has increased for the previous 26 consecutive quarters. Average asking rents increased $0.01 PSF NNN over the quarter to end at $0.68 PSF NNN. Asking rents have hit their highest point and will continue to increase as market conditions remain favorable.

Key Takeaways:

  • Average asking rents increased $0.01 PSF NNN over the quarter to end at $0.68 PSF NNN. Rents have surpassed their previous cycle peak of $0.62 PSF NNN reached in late 2008 and show no signs of slowing.

  • Vacancy rose 10 basis points to 1.3% due to vacant construction completions. Tight market conditions continue to limit expansion opportunities for firms in the region.

  • Sales and leasing activity totaled 2,279,100 SF, broken out into 13 sales (553,300 SF) and 43 leases (1,725,800 SF).

  • Net absorption totaled 187,700 SF for the quarter, the 26th consecutive quarter of growing industrial demand.

  • There remains 839,300 SF of space under construction.

  • The San Gabriel Valley is a tight infill market with few opportunities to develop additional industrial space.

Outlook:

Tight market conditions, limited development and rising industrial rents are expected to persist in the San Gabriel Valley industrial marketplace. The surge in rents is prompting many users to consider buying their properties, however the available inventory is insufficient to meet demand. New projects that completed this quarter will likely be leased or sold in short order, leading to further decreases in the vacancy rate. Market conditions will continue to remain tight as the major industrial drivers of the San Gabriel Valley, import / export businesses, food manufacturing and life sciences, continue to expand.