Vacancy within the vast warehouses and manufacturing buildings blanketing Southern California has hit 5.1 percent, as occupancy has diminished for the last three years.
The end of last year marked the 11th consecutive quarter of rising vacancies across the five-county region, reaching an average of 5.1 percent in the fourth quarter, according to the Commercial Observer, citing a report from Colliers.
The vacancy ticked up 0.3 percent in the three months ending in December.
The industrial slump by the largest industrial market in the nation comes after a vacancy rate of less than 1 percent throughout much of 2021 and 2022, according to the Observer.
But then came higher interest rates, and fewer e-commerce supply deliveries and industrial investment.
Despite a diminishing supply of new industrial real estate since the end of 2023, the combined availability rate for L.A. County, the Inland Empire, Orange and Ventura counties rose to 7.9 percent last quarter, a 12-year high, according to Colliers.
The region’s average asking monthly rent for industrial space fell to $1.32 per square foot, 17 percent less than the $1.59 per square foot at the end of 2023.
Net absorption was a negative 377,000 square feet last quarter, with more space becoming vacant than leased.
But that’s a vast improvement from the negative 1.1 million square feet in the previous period and the negative 2.8 million square feet at the end of 2023.
Much of the downward trends are driven by the Inland Empire, which at 647 million square feet contains 37 percent of all industrial properties of more than 10,000 square feet across the Southland, according to the Observer.
Industrial vacancy fell to 5.2 percent last quarter in the western Inland Empire, which includes Riverside and San Bernardino counties, down from 6 percent in late 2023.
At the same time, industrial vacancy in the eastern Inland Empire rose to 8.6 percent, a level not seen since 2012, according to Colliers. Average availability across both regions was 10.3 percent.
The western IE had three consecutive quarters of positive absorption, to 1.8 million square feet last quarter. The eastern IE had a negative 1.2 million square feet, with four of the last six quarters dipping in the red.
Average asking rents declined for the sixth straight quarter across the Inland Empire, dropping to an average of $1.15 per square foot per month.
On the upside, leasing activity across the IE was 10.9 million square feet last quarter, which Colliers projects will push vacancy to fall.
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