With vacancy of just 1.2%, the tight market means users have relatively few alternatives. Such momentum has generated significant rent growth in markets across the region. Class A rents (50K+) for the four core markets in LA have increased an average of 68.7% from 2010-2017. San Gabriel Valley, which has seen the most new development during this period saw its Class A rents climb by a whopping 86.5%.
“With major barriers to entry such as increasing construction costs, the lack of available land, and a lengthy entitlement process, Class A building sales are also breaking previous record sales prices,” said Tina Arambulo, Industrial Research Director for Los Angeles Basin at Cushman & Wakefield.
“Additionally, well-located infill buildings, especially those with excess land, are seeing tremendous investor interest as these kinds of assets are critical to the eCommerce supply chain as last mile facilities.”
With eCommerce, industrial space needs are less about the cost of occupying the real estate and more about transportation costs. The closer those operations can be to population centers, the less it costs retailers to deliver products and faster deliveries can occur. Lack of supply and rising land and construction costs suggest that rents will continue to rise in 2018.
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For more information contact:
Industrial Research Director, Los Angeles Basin
CA License #00616335