Vacancy Rises As Construction Boom Intensifies
- This quarter industrial demand was negative with 224,000 square feet returned to the market vacant.
- This caused the vacancy rate to increase 20 basis points to 1.4%. The vacancy rate will likely increase in future quarters as new industrial space is brought to market.
- Several new projects broke ground this quarter, with total space under construction reaching 2,267,700 square feet. The San Gabriel Valley remains one of the few industrial markets in Los Angeles County with prospects of future construction activity.
- Average asking lease rates increased $0.02 per square foot (PSF) triple net (NNN) over the quarter to end at $0.77 PSF NNN. This remains the highest level for asking rents in the San Gabriel Valley, as rents have been steadily rising for the past eight years.
The San Gabriel Valley consists of 31 cities and 400 square miles, with more than 1.8 million residents. International trade, especially with Pacific Rim countries, continue to be a vital aspect of the growing economy.Rents in the San Gabriel Valley market remain at an all-time high. The region still has an exceptionally low vacancy rate, leading many tenants to consider purchasing their real estate.
Industrial development remains strong as several large projects have broken ground this quarter. Rising rents and strong tenant demand for larger buildings will lead to more development in the future. This is especially the case for large modern last-mile distribution centers as their supply is incredibly scarce. The San Gabriel Valley is one of the few regions in Los Angeles County that has larger tracts of land for larger infill development projects. Other past projects in Los Angeles County have been met with great success, often being leased immediately upon completion. As market conditions remains tight in neighboring markets, it is expected that these large projects will have little impact on the future vacancy rate of the region.