2018 Q4 South Bay Industrial Knowledge Report

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South Bay Shows Momentum To End The Year

Key Takeaways:

  • Leasing activity continued to exhibit momentum in the fourth quarter, recording 512,700 square feet, mainly due to the El Segundo/Beach Cities submarket.
  • Average asking rents for the overall market continued to rise, pushing up to $2.72 per square foot (PSF) full service gross (FSG) from $2.66 last quarter.
  • Vacancy dropped 30 basis points as Class B and C properties drove demand.
  • 123 Nevada Street delivered 13,100 square feet to the market, leaving 216,100 square feet under construction, all of which is slated to deliver by the end of 2019.
  • Sales activity dropped as only two properties traded. 100 W. Broadway in Downtown Long Beach sold to Redwood Partners from Ocean West Capital, while Gateway Towers sold to the Ruth Group from Blackstone.

Market Overview:

South Bay market rental rates exhibited growth for the 20th time in 21 quarters, posting rates that have been historically reserved for the Silicon Beach markets to the north. Vacancy dropped from 15.7% to 15.4% on the strength of move-ins in almost all submarkets. For the year, demand totaled 204,900 square feet, less than totals for 2016 and 2017, but not unexpected as the construction pipeline shrunk. About 216,100 square feet of product remains under construction, though 75% of that is scheduled to be sold as condos. Healthy leasing activity closed the year, recording 2,506,200 square feet.

The outlook for the South Bay market remains positive. Vacancy should decrease through early 2019, as a lessened construction pipeline and strong leasing activity in 2018 will boost demand. Similar to West Los Angeles in the past couple of years, the South Bay has managed to defy rental rate expectations, routinely posting year-over-year growth in the 6-8% range. The attractiveness of the market, both in terms of office inventory and quality of life, should continue leading to rising rates and declining vacancies.




Greater Los Angeles South Bay Industrial

2018 Q4 South Bay Industrial Knowledge Report

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