MARKET DRIVERS
As Port numbers continue to trend upward, the million dollar question is, when will we start to see leasing demand increase as a result. To date, the correlation between TEU increases and leasing demand has not materialized as a measurable metric. But overall activity does appear to be improving, based on the number of property tours and letters of intent.
LEASING MARKET
Negative Net Absorption, rising vacancy, lowering rental rates and increased concession packages summarize the market year to date. TBD asking rental rate marketing is falling by the way side as most institutional owners will now quote a rate, some of whom had not done so in many years. And the asking rental rates being published are now 10% below where they were being verbally quoted at the beginning of the year. 4-5 months of free rent is now market for any new lease and free rent is now part of most active renewals, although more like 2-3 months.
SALE MARKET
Not a lot happening of note. We sold a 30,000 foot ground level class B building on La Cienega adjacent to LAX for $288 a foot on the building or equivalent to $108 per foot on the land. And the Herbalife 9 acre site at 190th and Vermont is rumored to be on the verge of going under contract somewhere between $110 to $120 per foot on the land. Once that site closes, it will serve as benchmark for where Class A industrial land is pricing.
NEAR TERM OUTLOOK
We are at the point where Landlords are willing to meet the market and opportunistic tenants who have the business will start to transact so we should see improved numbers in the next 90-180 days on the leasing side. There should be improvement in the velocity of the sale market as Sellers let go of peak pricing, in favor of what represents very good pricing from a historical perspective.
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