Rental Rate Rises to Highest Ever Rate
- Asking rental rates increased $0.03 per square foot (PSF) triple net (NNN) to end the quarter at $0.76 PSF NNN. Rents remain at an all time high and have surpassed the previous peak of $0.68 PSF NNN seen in 2007.
- Sales and leasing activity totaled only 780,300 square feet, broken into three sales (223,700 square feet) and 26 leases (770,800 square feet).
- The vacancy rate held steady at 1.6%, which is the lowest recorded vacancy rate ever recorded for the San Fernando Valley & Ventura County marketplace.
- Net absorption was negative 151,900 square feet for the quarter.
The San Fernando Valley is the most populous region of Los Angeles and home to major motion picture, music recording and television production companies. Much of the industrial infrastructure is devoted to ancillary services for the entertainment industry and to serving the local population. The San Fernando Valley has recently seen an influx of value-add investors continuing to purchase properties in the region.
The San Fernando Valley remains 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 to see increased investor activity on these newly leased buildings. Industrial users looking to find the ideal space to meet their needs 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. As industrial vacancy rates are at historic lows, industrial users seeking larger spaces are having to go further north into neighboring Kern County and particularly, the Tejon Ranch Commerce Center which has attracted increased attention as market conditions continue to tighten.