LA’s industrial market may be at max capacity

Leasing and I-sales that have been surging were down in Q3: report

Los Angeles /
Oct.October 09, 2019 10:00 AM
NAI Capital Vice President of Research, Marketing, and Communications J.C. Casillas and the Port of Los Angeles (Credit: iStock)
NAI Capital’s  J.C. Casillas and the Port of Los Angeles (Credit: iStock)

For the first time in years, Los Angeles County’s industrial market showed signs of slowing down, but it wasn’t for lack of demand.

Low availability and high pricing are discouraging leasing, according to a new report from commercial brokerage NAI Capital.

Leasing dropped 44.6 percent year-over-year, but average asking rent held steady at its all-time peak of $1.01 per square foot. Vacancy tightened slightly year-over-year to 2.3 percent.

That’s similar to the dynamics in L.A.’s residential market, where high prices and low supply have led to a slowdown. The median sales price for a home has climbed consistently over the last few years, setting a new record. But the prices are giving prospective buyers pause, and as they keep rising, sales volume has dropped.

In the industrial market, sales volume dropped 40 percent year-over-year in Q3. Last year was one of the strongest on record for the industrial market, with the price of land jumping 25 percent and the market only slowing toward the end of the year because of investor concern over the timing of the cycle, and limited available space.

The trade war with China appears to be tempering demand as well, according to the report. Imports to the key ports of L.A. and Long Beach were down this year through August by 2.4 percent, compared to last year’s 3.1 percent increase. Exports through the ports were down 6.5 percent year over year in the third quarter.

Sales volume has totaled $2.9 billion so far this year. Even with a slower quarter in L.A. County, investors are on pace to set another record for sales for the wider Southern California region.

Through August, sales volume is up 5.5 percent year-over-year, putting the region on pace for $12 billion in sales this year.

Institutional investors are helping to drive the Southern California industrial market. This year saw big plays by giants including Prologis, L.A. specialist Rexford Industrial Realty, and pension fund adviser Alere.

Even as leasing slows, there’s not enough space being built to alleviate the pressure in the near term — 6.9 million square feet of leasing in the third quarter outpaces the 5 million square feet of space under construction.


Related Articles

arrow_forward_ios
(Getty, iStock)
SoCal industrial boom may prompt tighter air quality regulations
SoCal industrial boom may prompt tighter air quality regulations
Clarion Partners CEO David Gilbert and Trammell Crow CEO Mike Lafitte. (The Center at Needham Ranch, Clarion Partners, Trammel Crow)
DrinkPAK gulps down 400K sf at Needham Ranch complex
DrinkPAK gulps down 400K sf at Needham Ranch complex
Rexford Co-CEOs Howard Schwimmer and Michael S. Frankel and Quixote CEO Mikel Elliott. (Google Maps, Rexford, Quixote)
Rexford Industrial inks studio and equipment firm to big lease
Rexford Industrial inks studio and equipment firm to big lease
Intercontinental’s Jessica Levin and PGIM’s David Hunt with 20730 Prairie Street (Google Maps, iStock)
Amazon-leased warehouse sells for $74M
Amazon-leased warehouse sells for $74M
Senior Vice President of Duke Realty, Nancy Shultz. (Google Maps, Duke Realty)
Duke Realty makes industrial buy in City of industry
Duke Realty makes industrial buy in City of industry
Prologis CEO Hamid Moghadam and 1920 West Baseline Road (Google Maps)
Prologis signs digital services firm to sprawling warehouse lease in Inland Empire
Prologis signs digital services firm to sprawling warehouse lease in Inland Empire
Rexford’s Howard Schwimmer and Michael S. Frankel with 2034-2040 East 27th Street (Google Maps)
Rexford fills holiday basket with another warehouse portfolio
Rexford fills holiday basket with another warehouse portfolio
Howard Schwimmer and Michael S. Frankel (Rexford, iStock)
Rexford adds 600K sf to industrial portfolio in Inland Empire
Rexford adds 600K sf to industrial portfolio in Inland Empire
arrow_forward_ios

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

Loading...