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NET ABSORPTION REBOUNDS IN THE FIRST QUARTER,
CONSTRUCTION ACTIVITY CONTINUES TO SLOW
Positive net absorption (+1.3 Million SF) in the Los Angeles Basin for
the first quarter of this year was due to a handful of very large deals
in the East Inland Empire (Whirlpool’s 1.6 million SF lease in Perris,
United Foods 613,200 SF lease in Moreno Valley and Kohler’s 480,300 SF
lease in San Bernardino). These large transactions were enough to compensate
for negative net absorption that occurred in other markets.
Construction activity continued to slow in the first quarter, only 16.7
million SF of industrial space was underway at the beginning of the year.
This is down from 19.8 million SF under constructing during the previous
quarter and down significantly from 31.2 million SF under construction
from this same time last year. The vast majority of the construction activity
underway continues to occur in the Inland Empire, the last developable
region of the Los Angeles Basin.
In Los Angeles and Orange Counties, just 3.5 million SF was underway. As
this space comes on-line, it will expand the base by just 0.36%, far below
projected demand. There has been an increase in the overall vacancy rate
for the Los Angeles Basin in recent quarters but remains exceptionally
low by national standards.
In the Inland Empire, 13.2 million SF was underway. As this space
comes on-line, it will expand the base in these locations by 3.7%, and
vacancy rates there are projected to climb, particularly in the East Inland
Empire.
Rental rates and sales prices have remained firm for the quarter on average;
rental rate decreases in the Inland Empire were matched against rental
rate increases in the rest of the Los Angeles Basin. The outlook is for
rental rates to climb in Los Angeles and Orange Counties, but to flatten
or even decrease in the Inland Empire. Sale prices per SF are generally
expected to flatten.
Contact Thomas Galvin at 909.937.6309 for more information.
  INDLAB08Q1.pdf
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