LA’s on a Roll

Industrial investors are headed for Los Angeles.
Los Angeles Industrial Market - Asking Rent Trends Q4 2014

Los Angeles Industrial Market – Asking Rent Trends Q4 2014

With roughly 40 percent of the country’s container traffic coming in through the ports of Los Angeles and Long Beach, the pressure is on for the city’s industrial market. 2015 is shaping up as a profitable year for the industrial sector, as investors are expected to take advantage of the widening of the Panama Canal. With a much-needed rail yard project stalled by litigation, and shipping now able to easily bypass West Coast ports, the future of L.A.’s industrial market might hang in the balance. However, recent market data collected by Marcus & Millichap shows that strong employment and high demand are driving the industrial market forward.

2014 saw around 2.3 million square feet of industrial space being added to the city’s stock. This is a significant decrease from 2013, when three million square feet of space was completed. Net absorption has been outpacing completions over the past few years, while vacancy has been consistently dropping. These are signs that the city’s industrial market still carried demand, according to Marcus & Millichap. 2014 ended up dropping around 50 basis points compared to year-end 2013 in terms of the average vacancy rate for industrial assets. The 4.4 percent vacancy rate is the lowest rate recorded since the economic downturn.

Rents in the industrial sector are expected to climb, Marcus & Millichap data shows. Asking rents grew by approximately 8.1 percent in 2014, to a per square foot rate of $7.71. Growing rents in the industrial sector are a national trend, a consequence of tightening conditions and good demand.

Chart courtesy of Marcus & Millichap