Market Highlights
- Direct vacancies remained stable in the second quarter at 1.4%.
- Direct asking lease rates slight adjustment by 2.1% quarter-over-quarter to $0.93/SF on a triple net basis.
- The average sale price in 2Q 2022 was $281/SF with cap rates settling at 5.0%.
Market Drivers
- Direct net absorption in 2Q 2022 reported positive with 1.5M SF. After net absorption of approximately 3.1M SF in the previous 12 months, the vacancy rate is trending near a historic low of 1.4%, and net absorption will exceed 2M SF in 2021 for the first time in more than 15-years. Availability is also extremely limited, at 3.0 % for a total of 2.0M SF, which is significantly lower than the national rate of 6.8%.
- Despite the fact that in recent quarters, lease and sales volume for logistics properties have dominated, Ventura’s industrial product is equally split between specialized industrial assets and logistics properties. Rental rates concluded the quarter at a continual all-time high of $0.93/SF on a triple net basis, an 8.1% increase year-over-year trend.
- The forecast for 2022 is rather favorable, as industrial investors’ interest in Ventura assets has expanded, with annual sales volume hitting an all-time high in 2021 and continuing this year. As a result of Amazon’s operations and local industrial user demand, vacancies have fallen to 1.4%, a historic low. Recent rent increases have been fairly spread across the metro’s submarkets. The widespread expansion shows that macroeconomic factors, rather than local preferences or special facilities, explain for recent trends in asking rents.
- Over 1.5M SF was delivered in the second quarter of 2022, with 583K SF now under construction. Ventura has given 3.6M SF during the previous five years. Developers have been active in pursuing restoration and repositioning projects due to a lack of construction property, raising land values to an average of $232.61/SF.
Economic Review
- In June 2022, the unemployment rate in Ventura County was 3.2%, up from a revised 2.7% in May 2022, but lower than the year-ago estimate of 6.8%. During the same period, California had an unadjusted unemployment rate of 4.0% while the national average was 3.8%.
- Sales activity will be driven by tenants trying to secure space and reduce occupancy costs. Year over year, square footage sold increase 50.4% as industrial buildings for sale remained in high demand and low supply. Constrained construction and user demand to lease or buy continue to drive up costs for warehouse distribution space in Ventura County.
Near Term Outlook
Industrial space will continue to be in high demand, with landlords striving to profit on pricing. The structures were a mix of new construction, office conversions, and relet space. Due to a few huge facilities in 2022 that haven’t been seen in the market since 2000, construction completions were historically high at 2.3M SF. Construction activity continues to be vigorous, with 583,136 SF now under construction. Ventura is an infill market with minimal room for new construction. The majority of the development will take place in the Tapo Canyon Commerce Center, where five buildings will be added to a submarket that does not often see new industrial construction. Developers will be tempted to pursue speculative construction redevelopment prospects as they continue to see the pressure of pent-up demand diminishing industrial space and bidding up pricing.
EDD, Costar, Port of Los Angeles