Baby steps…the Los Angeles Industrial real estate market is taking baby steps forward. We have now registered two quarters of positive net absorption and vacancy levels are falling …yet analytics note that Los Angeles is showing stability rather than improvement. Industrial sales are holding steady at a weak pace, while leasing activity is down slightly…but having said that we are in our 2nd quarter of positive net absorption (162 million sq. ft.).
Nationwide, the Inland Empire continues to be the most impressive industrial market in the country, capturing nearly 40 percent of all U.S. industrial absorption. Strong demand drove vacancy rates to around 7% around the region. This may lead to the first real signs of rental growth and speculative development. Congratulations! This has lead the return of “forwards” or “pre-commits” in the Inland Empire, where institutions began buying vacant warehouses, betting on future rent growth and leasing risk.
Los Angeles County is ranked as the number-one manufacturing center in the United States, with close to 930 million square feet of rentable industrial building area, and in 2012, our manufacturing sectors are on the rise. Aerospace and miscellaneous transportation equipment manufacturing increased by 6.2% in the first quarter of 2012 > up more than 25% in the first two months of 2012 compared to the same period last year. Elevated demand for aerospace products and parts is coming from from China, South Korea, Japan, and United Arab Emirates is yielding a surge in U.S. exports of these goods.
Port activity is on the rise as well. The combined ports were able to reach TEUs above one million again after nearly two years of lesser levels. Port of Long Beach total containers increased by 11.9% in March compared to last year. At the Port of Los Angeles, total containers were up by 8.3% on a year-to-year basis.
Other Los Angeles area manufacturing gains include apparel and leather manufacturing which increased by 10.8% in the first quarter of 2012. Textile production is up by 11.9% in the same period, after a moderate 4.9% increase the fourth quarter of 2011. Chemical manufacturing increased by 7.6% in the first quarter of 2012, compared to a 0.7% increase in the previous quarter. Computers and electronic products manufacturing increased by 8.7% in the first quarter of 2012, after a 0.5% increase the previous quarter.
Another part of the warehousing and distribution story has been the growing importance of e-commerce, with businesses such as Amazon.com emerging as an important part of U.S. industrial demand. E-commerce firms have leased multiple facilities across multiple markets riding high on the double-digit growth of online sales. Average vacancy rates in U.S. industrial markets have dipped below the 10% mark, and more than three quarters of the nation’s largest industrial real estate markets have recorded positive absorption results. With economic uncertainty looming, leasing activity in the latter part of the year cooled, but on the whole, 2011 has marked a step in the right direction for the industrial leasing landscape.
We’re here to help you with your commercial and investment property needs. Please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – firstname.lastname@example.org or 310.392.1211, and let us move forward together.
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