MARKET DRIVERS
TEU and airfreight numbers continue to improve, but excess capacity has muted any genuine change to the state of the leasing market. Vacancy clicked up slightly and effective rental rates continue to drift downward. As is typical, requirements in the market, tours, and even inquiries tapered off in the middle of November, so now their is a waiting game to see what the middle of January brings.
LEASING MARKET
The numbers are very clear. Direct vacancy and total availability rates increased from Q3 and year over year, we are seeing a 40% increase in direct vacancy and a 30% increase in Total availability. Watson Land Company signed a 100,000 SF plus lease with KHE Trucking, Majestic Realty signed a significant lease with Sunny Distribution for 400,000 SF. Two Hawthorne leases of note — Alere signed a lease with Skechers and Terreno signed a lease for a newly constructed building with Valar Atomic. Overall activity remains spotty.
SALE MARKET
As noted in our third quarter report, we alluded to an uptick in sales activities that were ongoing and that proved true. Rexford bought a 300,000 SF building in Compton from JP Morgan that is fully leased to Forward Air. Alere bought a 40,000 SF off-market from a Family Office seller. And West Harbor Capital closed on a 35,000 SF building in North Redondo Beach. Buyers are sensing opportunity and picking their entry spots. Sellers seem to finally be letting go of “pandemic pricing.” Buyers are exhibiting the belief that the leasing market will improve in 2025.
NEAR-TERM OUTLOOK
At this time of the year, it is especially challenging to gauge where leasing demand is at from a volume standpoint. We will just have to be patient and see how things start to look in the first 30 days of 2025. With the election behind us, and interest rates coming down, there is a renewed sense of optimism that we will see a meaningful uptick in leasing demand. If the initial signs of the sales market normalizing start to gain momentum, we expect 2025 to see increased sales volumes from 2024.
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