Industrial Market Tightens Up
The industrial real estate market remains challenged by the lack of new product and available land. The central Los Angeles vacancy rate of 0.7 percent for the third quarter reached a record low and is the lowest rate in the country, according to Grubb & Ellis. Los Angeles County recorded a 1.6 percent vacancy rate, unchanged from a year ago. The market remains the largest in the country and carries the distinction of having the lowest vacancy rates.
Many of the smaller operators are heading to submarkets such as the San Gabriel Valley for buildings of 100,000 square feet and less, as well as new industrial condominiums being developed.
Most of the demand is coming from wholesalers and importers as manufacturing jobs continue to shift overseas. Many industry watchers predict the Ports of Los Angeles and Long Beach will experience a slight decrease in the rate of growth of incoming cargo as importers look for less-crowded alternative ports and shift warehousing to locations such as Southern California’s Inland Empire. In the Inland Empire, tenants are paying higher rates to remain west of Interstate 15, which provides easier access to and from the ports. Grubb & Ellis brokers reported many occupants were renewing leases and paying higher rates in the western submarkets rather than moving east near Interstate 215, where the lower rents are located. As a result, vacancies have slipped below 2 percent in the western submarkets, while overall rates rose to 4.9 percent from 4.3 percent. —Robert McAllister
