Want to know the hot words in industrial real estate this month? Whisper multi-modal mega-distribution hubs in submarkets near key import / export destination into an industrial capitalist’s ear and watch them light up with delight. Class A warehouse facilities near seaports, air cargo and railroad transit locations remain the focus of industrial demand.
Los Angeles has recovered nearly 38% of total jobs lost during the recession – but only 30% of jobs in the trade, transportation and utilities sector have come back. The pundits authoring Marcus & Millichap’s Third Quarter Industrial Research Report believe significant growth ahead.
Thanks in part to increased activity at the ports of Long Beach and Los Angeles, Los Angeles industrial tenants absorbed 4.4 million square feet in 2012, nearly double the construction levels. Vacancy rates fell to 5.5%.
We like our local ports; they’re a big part of the Los Angeles economy. The total number of containers handled in July at the ports of Long Beach and Los Angeles increased by 2.3% on a year-over-year basis to 1,277,806 TEUs (twenty-foot equivalent units).
A little history Los Angeles has always lacked a natural harbor. Juan Rodríguez Cabrillo first identified San Pedro as a potential harbor in 1542, but in the late nineteenth century, Santa Monica very nearly supplanted San Pedro as the region’s commercial shipping hub. If a late-nineteenth century political struggle between the Los Angeles Chamber of Commerce and the Southern Pacific Railroad had ended differently, it is Santa Monica that might today be crawling with semi-trailer trucks, cranes, and container ships.
We now return you to our regularly scheduled programming. Beyond the coasts, the trend in developing ultra-efficient inland ports for intermodal transportation and regional goods distribution has emerged as a common theme across many of the more desirable and emerging industrial markets.
Brisk leasing and build-to-suit activity ties directly or indirectly to port-related activities in many of the top-ranked markets, including Los Angeles (#1), Houston (#2), Seattle-Tacoma (#3) and Miami (#4). The confluence of demand from publicly traded (and aspiring) e-commerce retailers, conventional retailers engaged in e-commerce, and third-party logistics providers have purchased and/or leased the majority of available Class A space, creating strong rent growth in the top markets.
Though economic growth has been modest so far this year, demand for industrial space is being supported by savvy new businesses with bright futures. Lucky for warehouse owners, demand for big-box distribution locations has expanded beyond the same old suspects like logistics services, freight forwarders and trade-related activities, to include a growing Crewe of manufacturers, food suppliers; e-commerce companies home goods fulfillment centers.
Owner/users are particularly excited. Interest rates on SBA loans are still under 5%. Savvy businesses in small-to-mid-sized manufacturing, as well as high-tech firms, are buying properties and investing in their companies’ future. In fact, Orange County (#5) attributes its stability to a diverse range of expanding small-to mid-sized companies. Asking rent is predicted to rise 2.0%, to $5.12 by year end, with stronger rent increases are anticipated in new product and existing Class A product.
Slow payroll growth drags Industrials in the Inland Empire (#11), but the region continues to benefit from spillover demand from both Los Angeles and Orange County.
Our coastal industrial markets remain tight with little land available to accommodate new or expanding big-box requirements. That will always keep our values and our lease rates strong.
For more information please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – email@example.com or 310.392.1211, and let us move forward together.
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