The Los Angeles Industrial Real Estate market is vastly improving with a 46.9% increase in occupancy rates and rising rents compared to 1st quarter reports a year earlier.
The greater Los Angeles area overall has the second lowest vacancy rate for Industrial space in the nation at 3.3% in the first quarter of 2015 compared to first quarter 2014. Almost 11 million square feet of industrial space were leased in the first quarter. San Francisco had the lowest vacancy rate in the nation at 2.3%, according to a Cushman & Wakefield report.
The L.A. area industrial vacancy rate this time last year was 1% higher at 4.3% overall. Leasing activity was up 31.7% in the first quarter from a year ago over all; however, North Los Angeles did see a decrease in industrial leasing activity due to the decline of film industry.
New development in the Los Angeles area was at only 0.2% of existing stock in the region due to a short supply of land to develop and the high cost of industrial land, the report said. As a result, rents have been trending up since 2010. Rents have risen 22% in the past 5 years which occurred mostly in the last 24 months.
Industrial real estate investment sales increased by 66.7% in the L.A. region compared to the same time a year ago. However, first quarter user sales compared to investor sales were up only 21% from the same time last year due to the lack of inventory.
I have clients who have been looking for over a year for a certain type of industrial building to purchase and cannot find anything that suit their needs. Industrial sales only represent less than 10% of all transactions in the industrial market.
The South Bay had record high leasing activity for the first quarter and the second over- all highest leasing activity. The increase was 22.4 percent higher than the same time in 2014 with over 3 million square feet leased. “This is the highest recorded leasing activity since the 2nd quarter of 2013.”
The demand in the South Bay area is great. I just leased a building in the South Bay that had several offers which turned into a bidding war, and the highest bid won. It was well over the asking price. As a result, I would say that it is safe to say it’s an owners market especially in industrial areas close to major L.A. shipping and airports.