Tight Market Condions & Rising Rents

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 6,025,000 SF of industrial space this quarter with uneven gains by at 4,696,500 SF, Los Angeles County had positive net absorption of 997,900 SF while Orange County reported 330,600 SF of positive net absorption.

  • This quarter saw 4,505,100 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 $0.67 PSF NNN, the highest reported rental rate for the Greater Los Angeles Basin.

Submarket Overview:

The San Fernando Valley is in the middle of a building boom. Tight market conditions and rising rents are leading to a much needed increase in supply. As these newly completed buildings are leased up, we expect them to draw increased investor activity. 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 is a strong demand for new industrial buildings as developers are challenged with finding available infill sites. Industrial product is expected to continue depleting due to many properties being sold as land for multifamily redevelopment or converted to creative office space.