MARKET DRIVERS
FUELED BY THE RISE in ecommerce and being known as a logistical hub, there was no shortage in demand for big-box locations throughout the market. Major tenants that continued their expansion efforts included Amazon, IDC Logistics, and CLC Logistics, as they were some of the top leases in the second quarter.
VACANCY LEVELS FELL in 2Q21 to 2.7%. Demand for newer state-of-the-art locations has never been higher and coupled with limited availabilities for quality industrial space has caused a spike in rental rates. Average asking rates increased by 8.33% YOY to $0.78/SF, a new all-time high.
CONSTRUCTION DELIVERIES DECREASED in 2Q21 with over 4.2M SF entering the market. Yet, there has been no slow down on new projects with over 22.8M SF under construction. Over 75% of the 22.8M SF remains available for lease, but brand-new projects commonly become pre-leased or leased within a couple months after completion, a trend that occurred over the past 2 years.
ECONOMIC REVIEW
THE PORTS OF LOS ANGELES processed 1,012,048 TEU’s in May, an increase of 74% from the year prior and the first time a Western Hemisphere port has processed over 1M TEU’s.
THE UNEMPLOYMENT RATE as of May was at 7.2% with construction and manufacturing jobs reporting job gains of 1,600 and 1,300, respectively.
NEAR TERM OUTLOOK
MARKET FUNDAMENTALS WILL REMAIN ROBUST
as demand continues to outpace supply. Additionally, drayage costs have increased and tenants located in the East may turn their focus to the West to better serve the neighboring markets of LA and OC. Demand for newer big box locations will continue to rise as major tenants look to further perfect their logistics channels. Furthermore, tenants relocating out of LA and OC in search for more affordable rates will drive up the competition for quality industrial space, further propelling rental rates upward.