USER DEMAND for industrial space has never been higher. Tenants and buyers that halted negotiations during the pandemic have been forced to act swiftly, further pushing up rental rates. Direct asking lease rates for 3Q 2021 were $1.09/ SF, a new record for the market.
POSITIVE GAINS in absorption continued with over 911K SF, the highest since the pandemic started in early 2020. Increases in tenant movement have compressed vacancies to historical lows, falling to 1.7%.
OVER 1.9M SF remain under construction. Developers remain aggressive in search of redevelopment and repurposing projects. Rexford Industrial purchased two office campuses for $175M with plans to develop new state-of-the-art logistic facilities to supplement the rising infill demand.
AFTER coming off strong leasing activity in the past three quarters, leasing activity in 3Q 2021 fell to 2.2M SF.
AS OF AUGUST 2021 the unemployment rate was at 6.0%, 30 bps lower from the month prior and lower than the state’s average of 7.5%. Job gains between July and August reported an increase of 7,200 jobs.
WITH OVER 66 CARGO ships waiting to dock, processing times have been pushed from two days to 6 days. Delays may continue as consumers prepare for the holiday season. The Port of Long Beach processed 807,704 TEU’s in the month of August, an 11.3% increase from the year prior.
INCREASES in renewal activity are to be expected moving forward as relocation options across the LA Basin remain limited. Additionally, tenants that have looked to the Inland Empire’s competitive rates will also need to assess the rise in drayage costs. With vacancies at historical lows, we can expect leasing activity to soften in the following months, thus propelling rental rates upward as the competition for quality industrial space increases.