Industrial landlords’ wonderland: LA rents rise 8.2% as e-commerce elbows in

Vacancy stayed tight at 1.1 percent in Q2: report

Los Angeles /
Aug.August 02, 2017 01:30 PM

Updated, Wednesday, September 6, 4:25 p.m.: We want it, and we want it now. That’s the consumer philosophy that keeps L.A.’s industrial vacancy low, while third-party logistics, e-commerce and delivery services gobble up space — including “final mile” facilities that can deliver goods faster to customers.

Industrial vacancy remained at 1.1 percent in Greater Los Angeles during the second quarter, unchanged from the quarter prior and the year prior. Rents rose accordingly: 8.2 percent year-over-year, according to a CBRE report.

When you look a few years back, the change is even more stark. Asking rents rose 26 percent from the third quarter of 2014 to the second quarter of this year.

The second quarter saw its share of notable we-want-it-now transactions. FedEx committed to lease 450,000-square-feet of under construction in the Arcadia Logistics Center in Arcadia, while UPS leased 478,000 square feet in Mid-Counties in March. Williams-Sonoma renewed its 1.2 million-square-foot lease at 21508-21758 Baker Parkway in the City of Industry.

Class A and B industrial rents reached 78 cents per square foot per month in the second quarter—and they are expected to rise. CBRE Economic Advisors forecasts that rents will rise 4.4 percent in 2017 and 5.2 percent by mid-2018, turning an already strong landlord’s market into a beast.

As Class A space became increasingly difficult to find and landlords began to offer fewer concessions—like paint, carpet or free rent— demand has increased for Class B and C product. But supply has dwindled across all classes.

“Institutional landlords have scaled back free rent significantly,” said Billy Walk of CBRE.

Development hasn’t caught up with demand, but there is 7.6 million square feet of product currently under construction in Greater Los Angeles, according to a report from Colliers, which forecasts that new completions will measure 4.8 million square feet by year’s end.

Chart by Naiwen Tian

Correction: A previous version of this article had an error regarding the size of FedEx’s lease in Arcadia. It is 450,000 square feet. 


Related Articles

arrow_forward_ios
(iStock)

LA County sued over commercial eviction moratorium

LA County sued over commercial eviction moratorium
The future of San Francisco’s Oceanwide Center is up in the air again (Getty, Foster and Partners)

Contractors pull out as Oceanwide Center sale falls through again

Contractors pull out as Oceanwide Center sale falls through again
Granite CEO Michael Dardick and Industrious CEO Jamie Hodari

Industrious partners with landlords to offer tenants satellite workplaces

Industrious partners with landlords to offer tenants satellite workplaces
Colorado Campus at 2041-2115 Colorado Avenue and Northwestern Mutual CEO John E. Schlifske

Northwestern Mutual picks up Santa Monica office campus for $166M

Northwestern Mutual picks up Santa Monica office campus for $166M
CBRE CEO Bob Sulentic; the firm has shifted its global HQ from LA to Dallas. (CBRE, Getty)

“Sad day” in LA: CBRE’s corporate exit latest blow to dented office market

“Sad day” in LA: CBRE’s corporate exit latest blow to dented office market
Prop 15 property tax measure draws millions (Credit: iStock)

Prop 15 property tax measure draws millions of dollars from for and against campaigns

Prop 15 property tax measure draws millions of dollars from for and against campaigns
California is allowing barbershops and salons to reopen under new coronavirus mitigation guidelines (Credit: Noam Galai/Getty Images)

California allows barbershops to reopen, but LA holds back

California allows barbershops to reopen, but LA holds back
LA County assessor Jeffrey Prang

LA County properties valued at nearly $2 trillion…before pandemic

LA County properties valued at nearly $2 trillion…before pandemic
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...