Uneven Rebound Underway In Greater L.A.
- The headline numbers have exceeded expectations in the third quarter of 2020. In the midst of a pandemic-induced recession, the vacancy rate has fallen 30 basis points, net absorption turned positive, construction activity increased and rents remain at all-time highs.
- This rising tide has not lifted all boats, however. Most gains were contained to the Inland Empire, with buildings over 500,000 square feet in this market accounting for 50% of all net absorption in the entire basin.
- This quarter saw the release of pent-up industrial demand emerging from the prior quarter’s economic shutdown. This is the easy part of the recovery. It remains to be seen if the industrial market can continue to exceed expectations.
Los Angeles Basin Industrial Market
The Los Angeles Basin industrial market is the largest in the United States, totaling more than 1.6 billion square feet. It has been characterized by some of the highest asking rates and lowest vacancy rates of any market in the nation.
The ports of Los Angeles and Long Beach are the primary industrial driver making up for lost time. In the last three months, port activity surpassed 2019 levels as a growing backlog of cargo is making its way through the nation’s supply chain.
E-commerce has proven to be the saving grace for the industrial market. Consumers have accelerated their adoption of purchasing goods online. E-commerce has seen as much growth in the last six months as it has in the last decade, and these changes look to be permanent. The world will need more industrial buildings and fewer retail stores.