As the weather warms up, so do lease rates for industrial properties across Silicon Valley.
A tight market for industrial space across the South Bay has notched up asking prices, with prices for non-warehouse industrial space rising 7 percent from the first quarter, the Silicon Valley Business Journal reported, citing a study by Kidder Matthews.
The average asking rate for warehouse leases rose 3.1 percent to $1.33 per square foot, from $1.29 in the first quarter. The year-over-year increase was 15.7 percent, from $1.15 per foot.
“Persistently low vacancy and availability rates for all industrial types point to the strength of the industrial market,” Kidder Matthews said in the report. “Investors and owner-users are still competing over a very limited supply.”
Vacancy rates for warehouse space rose slightly in the period from the first quarter, according to the report, while industrial vacancies fell.
The vacancy rate for warehouse space rose to 3.1 percent in the second quarter, from 2.7 percent in the first quarter. Warehouse vacancies stood at 6.1 percent in the second quarter last year.
Net absorption — the amount of space leased less the sum of new space coming on line and space given up by tenants — was negative 365,289 square feet in the warehouse market.
The vacancy rate for non-warehouse industrial space fell to 2 percent in the second quarter, from 2.4 percent in the first period. Non-warehouse industrial vacancies stood at 2.6 percent in the second quarter last year.
Net absorption of such industrial space was 152,034 square feet in the second quarter.
The asking rate for leases on non-warehouse industrial space, excluding expenses, was $1.77 a square foot. In the first quarter, the asking rate was $1.65 a foot. In the second quarter last year, the rate was $1.58.
Some relief for the market may be in sight, according to the report. Rising interest rates are putting pressure on asking rates, Kidder Matthews said. Meanwhile, developers broke ground on a 320,000-square-foot warehouse project in Fremont in the second quarter.
[Silicon Valley Business Journal] – Dana Bartholomew
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