Vacancy Flat & 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 $0.01 PSF NNN over the quarter to $0.79 PSF NNN. Rents have increased 9.7% over the last 12 months and are at their highest point ever.
Net absorption was 421,900 SF this quarter, much of which came from several new projects that finished construction this quarter.
Sales and leasing activity totaled 2,699,200 SF broken out into 10 sales (294,800 SF) and 48 leases (2,404,400 SF).
There is 1,031,700 SF of new space currently under construction which will finish in the next 12 months.
Vacancy has remained flat over the quarter at 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.