Industrial Rents Continue Upward
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.
Industrial rents increased $0.03 PSF NNN over the quarter to $0.78 PSF NNN. Rents have increased 13% over the last 12 months and are at their highest ever point.
Net absorption was 457,500 SF this quarter as the second portion of the recently completed Brickyard project was leased.
Sales and leasing activity totaled 3,038,200 SF broken out into 10 sales (312,400 SF) and 53 leases (2,725,800 SF).
There is 1,505,400 SF of new space currently under construction which will finish in the next 12 months.
Vacancy has decreased 20 basis points to 0.8% the lowest recorded vacancy rate ever for the region.
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.