LA’s Industrial Market Escalates Amid Record Demand
Report shows vacancy rate for last-mile facilities below 3 percent for almost a decade
By Greg Cornfield January 10, 2022 7:35 pm
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A new report underscores just how frenetic Los Angeles’ industrial real estate market was by the end of 2021, and what that means for the rest of this year.
The report from Newmark (NMRK) shows that the record demand for last-mile facilities remains pronounced, super charged by social distancing measures and increasing adoption of e-commerce shopping. L.A. has almost 1.1 billion square feet in the market, and just 1.1 percent of it was vacant by the start of 2022. That mark was the second lowest in the nation behind the Inland Empire, and it has been under 3 percent for 39 straight quarters.
Amazon (AMZN) highlighted the activity in the fourth quarter as it moved into a new 1.5 million-square-foot Oxnard facility, as well as a 290,000-square-foot last-mile delivery center in Simi Valley. Additionally, Amazon signed a 319,500-square-foot pre-lease at The Center at Needham Ranch in Santa Clarita, and DVS-Panalpina signed for 295,000 square feet in Torrance in L.A.’s South Bay. Fedex, Furniture of America, Omni Logistics and Relativity Space all signed new leases greater than 300,000 square feet on the year.
Rents for direct leases over 50,000 square feet in warehouses had a weighted average of $1.42 per square foot in the fourth quarter, up 39 percent from the fourth quarter of 2020. Rent was also 127 percent higher than it was six years ago, and new construction rents may cross the $2-per-square-foot threshold by this time next year.
Meanwhile, land costs in the region’s infill markets have more than tripled since 2015 and currently average $165 per square foot. Over the past 12 months, that mark has jumped 94.1 percent.
Just 25.3 million square feet in new ground-up construction was built over the past five years in L.A., representing 0.2 percent of existing inventory. Approximately 6 million square feet is currently under construction.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
