MARKET DRIVERS
TENANTS ARE STILL COMPETITIVE for the limited space in the market, which is causing lease rates to rise. Direct asking lease rates came to $1.32/SF at the end of the second quarter, with IE East setting the bar at an exceptional rate of $1.46/SF.
AS OF THE END OF THE SECOND QUARTER, direct vacancy rates were 0.9%, which are historically low levels. Modern, more recent buildings are in greater demand than ever since they are frequently pre-leased, and in certain cases, talks have already started on unqualified properties.
RECENT QUARTERS HAVE SEEN a lot of activity from firms in the logistics and e-commerce sectors. Over the previous year, NFI, Unis Transportation, Motivational Marketing, 4PX Express USA, and Allen Distribution have all rented more than 400,000 SF a piece.
DUE TO THE EXTREMELY LOW AVAILABILITY in older buildings, prospective tenants frequently resort to new construction to lease or purchase. Even though there are lease opportunities for around 75% of the 38.2M SF now under construction, most deliveries over the previous three years have been preleased or leased soon after completion.
ECONOMIC OVERVIEW
MAY 2022 saw a 20 BPS increase in the unemployment rate for Los Angeles County, bringing it to 4.5%. In May 2022, job increases climbed by 14,000 over the previous month to 5,058,000.
WITH A GAIN OF 31,100 jobs, trade, transportation, and utilities took the lead. There were payroll gains in the transportation, warehousing, and utility sectors (up 24,900), the retail sector (up 3,900), and the wholesale sector (up 2,300).
NEAR TERM OUTLOOK
THE INLAND EMPIRE The Inland Empire has made a name for itself as the most sought-after market in the country, and growth in the area is still mostly driven by e-commerce and the ports of Southern California. The Inland Empire, from the San Gorgonio Pass to the Coachella Valley, are experiencing an increase in the number of large industrial warehouses that are moving east along Interstate-10. More than 3.0 M SF of extra logistics space will be provided by two proposed structures next to I-10, which crosses over the nearby communities of Beaumont and Jurupa Valley.
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