The Real Deal Los Angeles

LA is a top “buy” market for industrial investors: report

Ten-X ranks it the 4th hottest market in the US for industrial investment

May 11, 2016 04:07PM

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Rendering of an industrial development at 825 South Ajax Avenue in LA's City of Industry (credit: Bridge Development)

Rendering of an industrial development at 825 South Ajax Avenue in LA’s City of Industry (credit: Bridge Development)

Los Angeles is the fourth hottest industrial market for investors in the country, according to a new forecast by Ten-X, an online real estate marketplace.  

The report cited low vacancy rates as one of the reasons it forecasted high investor interest. In the L.A. area, vacancy was just over 3 percent at the end of 2015, nearly half of the area’s recessionary peak, according to Ten-X. It is forecasted to dip below 3 percent in 2017 or 2018 before climbing to the mid 3 percent range in 2019, the report predicted.

It also forecasted that rent growth in L.A. would be robust through 2018 before dipping in 2019. Net operating income, however, is constrained in Los Angeles as the market already faces low availability, leaving little room for occupancy improvement.

Atlanta, Nashville, Tenn., and Memphis, Tenn., took the top three slots in the forecast as “buy” markets where there are growing economies and positive employment growth.

Meanwhile, investors may want to consider selling in Houston, Dallas, Fort Worth, Texas, San Antonio and Pittsburgh due to exposure to the energy sector, oil prices, and sagging employment, the report said.

“The industrial sector’s fundamentals continue improving, signaling strong gains in the coming years,” said Peter Muoio, chief economist at Ten-X. “Because U.S. industrial vacancies fell by 50 bps for the third straight year in 2015 — marking their lowest level since 2000 — robust demand will drive vacancies even lower going forward, eventually reaching a cyclical trough at 7.3 percent in 2018.”

Ten-X, formerly Auction.com, the company best known in L.A. real estate circles for selling Manhattan Towers last year for $96 million, recently expanded into traditional sales, launching a platform for buyers and sellers. — Hannah Miet