Rents Rise Leading To Increased Construction
- Asking rental rates increased $0.02 per square foot (PSF) triple net (NNN) to $0.72 PSF NNN. Asking rents remain at their highest recorded point.
- Increasing demand for larger infill industrial sites has led to a spike in development, with several new projects breaking ground this quarter. Total construction activity ends 2018 with 757,500 square feet currently under construction.
- Sales and leasing activity totaled 2,859,800 square feet this quarter, broken out into nine sales (639,300 square feet) and 49 leases (2,220,500 square feet).
- Space givebacks totaled 222,500 square feet this quarter, with 2018 net absorption standing at negative 889,700 square feet.
Central Los Angeles Industrial Market:
The Central Los Angeles industrial market is the oldest market in the Greater Los Angeles region, with a large proportion of older and functionally obsolete buildings. Many of these lower clearance buildings are located in the Central Los Angeles submarket, near downtown Los Angeles. Much of this space has been converted to residential, retail or office product. Industrial demand is heavily concentrated in the Vernon and Commerce submarkets, with food production and apparel manufacturing remaining the top industries.
Much of the Central Los Angeles marketplace is situated in Opportunity Zones, which are distressed urban areas with favorable tax treatment. This may lead to increased investment activity in these areas as investors seek a safe haven for placing capital.