Los Angeles industrial real estate market reports
Q3 2021
Industrial land is limited in Los Angeles, and cities are not modifying their general plans for more industrial development. Demand for industrial is so great investors in some instances are buying office buildings for underlying industrial zoning. Ecommerce penetration has only reinforced the need for new last-mile facilities near Los Angeles and Southern California consumers. Development is constrained by a lack of developable land, and warehouse space is highly coveted due to an increase and backlog of cargo at the ports. Local ports service 78% of the West Coast container volume and nearly a third of all imports to the United States.
Economic conditions
- Los Angeles unemployment is 8.8 percent as of August 2021. The economy has added back over 825,000 jobs since last year.
- The metro experienced an increase of 3.5 percent in industrial employment from July 2020 to July 2021.
- Job additions in transportation, warehousing & utilities sector up 2.4 percent year-to-date.
Recovery rate
- A record 73 cargo ships were waiting to enter the ports in September.
- Over the past 12 months, the ports had its two highest-performing quarters and top four individual months in the Port’s 110-year history.
Industrial demand
- Port volume traffic is on pace to increase 15.2 percent compared to last year.
- With a 1.5 percent vacancy in Los Angeles, tenants in the market are unable to find space.
- Net absorption year-to-date is 10.5 million square feet. Aggregate 2021 net absorption is already greater than any other year in the past two decades.
Industrial supply
- During Q2, there were 33 properties 100,000 to 250,000 sf, totaling 4.5 msf under construction.
- 49 percent of all available large blocks of space are in the 150,0000 – 250,000 sf size range.
- For most industrial submarkets in Los Angeles vacancy is under 1 percent.
Pricing trends
- Asking rents have risen 13.9 percent since the onset of the pandemic.
- Rental rates have trended upward since 2018, increasing 7.4 percent year-to-date.
- Healthy demand and tightening leasing fundamentals have driven rents more than 75.0 percent since bottoming in late 2010.
Capital markets
- Los Angeles Industrial investment activity surged to $9.8B since 2020.
- Investors continue capital deployment on industrial assets at a rate that is 50.3 percent higher than the prior five-year average.
- It also translated into higher valuations for Los Angeles industrial assets, with a 5.2 percent higher per-square-foot rate than a year ago when the pandemic started.
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