SoCal industrial vacancy drops to 1.5% to end red-hot 2021
Tightens from 3.6% rate for fourth quarter of 2020 as rents rise 19%
Good luck finding industrial space across all of Southern California.
Around 1.5 percent of industrial real estate across the region was vacant at the end of the fourth quarter last year, according to a report from Savills. At the end of the fourth quarter in 2020, the vacancy rate across Southern California was 3.6 percent.
Industrial rents have also risen by 19 percent year-over-year, reaching $1.15 per square foot at the end of 2021, compared to just under $1 in 2020.
The low vacancy rates and increasing demand for space — propelled by a growth in e-commerce and online shipments — has prompted investors to build new space. But it’s not coming fast enough.
Although 33.2 million square feet of industrial space is under construction in Southern California, that equates to 2.5 percent of total inventory across the area–and even with the new space the region is considered “severely supply constrained.”
That’s one reason tenants are taking up warehouse space before the properties are finished.
“Expect tight industrial market conditions to remain next year,” according to the Savills report, given that pre-leasing activity is still high and new supply continues to be limited.
Demand is driven in part by the ongoing growth of ecommerce and its need for warehousing and distribution space. Other industries are also chipping in, though, including tech startups in aerospace, defense, robotics and electric vehicle industries are also taking up more space.
The largest lease signed across Southern California in the fourth quarter was at Duke Realty’s 1.2 million-square-foot property at 728 West Rider Street in the Inland Empire. Lecangs, an order fulfillment company, took the warehouse.
All of the five largest leases were signed in the Inland Empire, increasingly a logistics hub for the broader region.
However, San Diego saw the top sale in the fourth quarter. LaSalle Investment Management bought a 665,229-square-foot complex for $158.5 million — around $238 per square foot.
One of the most expensive deals in terms of price per square foot was CenterPoint Properties’ purchase of a nearly 300,000-square-foot property in Los Angeles’ South Bay for $143 million, which came out to $478 per square foot.