MARKET DRIVERS
LEASE RATES CONTINUE TO SPIKE as tenants remain aggressive for the limited available space in the market. Direct asking lease rates concluded the first quarter at $1.08/SF, with IE West reaching an unprecedented rate of $1.29/SF.
DIRECT VACANCY LEVELS COMPRESSED at historical lows, concluding the quarter at 1.2%. Demand for newer state-of-the-art locations has never been higher as new construction projects are commonly pre-leased, and in some cases, negotiations have already begun on buildings that have not been entitled.
THE RISE IN ECOMMERCE and a push for major retailers to hold more goods to compensate for any future supply disruptions, have increased the demand for big-box locations. Retailers continued expansion efforts with Home Depot and Best Buy leasing 1,099,629 SF and 501,649 SF, respectively.
CONSTRUCTION DELIVERIES SLOWED in 1Q 2022 with over 5.2M SF to help meet the rise in demand. A staggering 32.5M SF remain under construction with over 4.0M SF of that going to Amazon’s multi-level project in Ontario.
ECONOMIC OVERVIEW
THE PORTS OF LOS ANGELES processed 857,764 TEU’s in the month of February, a 7.3% increase compared to last year. This marks the Port’s busiest February in its 115-year history.
AS OF FEBRUARY, the unemployment rate was at 5.0% with the construction sector expanding by 4,700 jobs over the month.
NEAR TERM OUTLOOK
LIMITED AVAILABILITIES, sweeping the LA Basin will keep competition for space at high levels. Tenants who have looked towards migrating from neighboring Los Angeles and Orange County are in for a sticker shock as rental rates will continue to spike. We can expect renewals to increase in the following quarters as options for relocations remain limited and available space quickly becomes leased a year in advance.for relocations remain limited and available space quickly becomes leased a year in advance.
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