The Southern California industrial market continues to exhibit consistent demand for tenant space and strong occupancy levels. The five-county area, which consists of approximately 1.7 billion square feet of industrial space, maintained a low vacancy rate averaging approximately 3%.
The economic climate is posing many challenges to the Los Angeles county as well as the Industrial Market;p however, the fundamentals remain in place for strong performance in the marketplace.
Capitalization Rates for industrial investment properties hovered just below six percent. Vacancy remains low in the 3-5% range, but several points higher in the Inland Empire. Many brokers have seen a 20-30% decline in transaction volume and demand.
More specifically, Gross Absorption is 50% compared to a year ago, with 2008 Q1 at 2.2 million versus 2007 Q1 at 4.1 million for the Central Los Angeles area. The Central Los Angeles Market is the largest industrial base in Los Angeles County. The Central Market remains one of the tightest and strongest submarkets in the region with little if any new construction due to the high cost and low availability of land.
To some degree, reduced container traffic has contributed to the diminished demand. Containers handled at the ports of Los Angeles and Long Beach were down 5.6% and imports sunk 5.9%, while exports increased 22%. Lease rates have held steady though. Â Although, tenants are demanding more concessions in the form of free rent and tenant improvements.
The Central Los Angeles industrial real estate market encompasses approximately 300 million square feet of building area. This market includes the well-known submarkets: City of Vernon, City of Commerce, and Downtown Los Angeles. It should be noted that the following areas on the periphery to Downtown are also included in the Central LA market: Lincoln Heights, Glassell Park, City Terrace, East L.A., Boyle Heights, South Industrial, and the Goodyear Tract. In the Central LA submarket buyer and tenant demand remains strong compared to outlying markets. In fact, the Central submarket remains the tightest metropolitan industrial market in the nation. This submarket is an infill market and very little new construction occurs on empty industrial land (with almost no construction on other types of commercial real estate such as retail and office). The Central LA market is also the largest industrial real estate submarket in Los Angeles County.
There is an unrelenting desire by warehouse users to occupy properties within close proximity to Los Angeles’ ports – where 40 percent of all containerized cargo enters the United States. Vacancy rates remain historically low in the Southern California Industrial Real Estate market, however, a flattening of cargo activity at the local Los Angeles and Long Beach ports may spell a warning for the area’s outlook in 2008. The fact remains, though, that the two ports ranked first in the nation for container activity in 2006, placing 5th in the world. In the above aerial photo, industrial parcels are outlined in green.
A 16,570 square foot building was leased to a company that prepares school lunches. The building was located at Alameda and 21st Street, and was formerly occupied by a seafood processing and packaging company which focused on shrimp products. Included in the long term lease was 2 cooler boxes, a 22 foot high freezer, and a large food processing room with washable walls and floor drains. The prior tenant relocated to a seafood building in the South Bay that was approximately 12,000 square feet in size. One broker coordinated the simultaneous transactions and the entire deal spaned several months.
An 18,000 square foot warehouse was leased to a Downtown Los Angeles produce company on Industrial Street. The building included an unusually high number of dock high loading positions for an older building: eleven. The produce company was attracted to the building for its proximity to the produce market ,the fact the building had 3 refrigerated coolers, and there was sufficient yard space to accomodate large 53 foot container trucks.
The following food buildings are available for occupancy lease and/or sale:
- Marengo St- Cooler and freezer with dock high loading for a 10,000 SF facility. Forlease.
- Main St- USDA food processing facility built in 1999 with 5000 SF freezer, 2500 SF cooler and 5000 SF processing room in 26,000 SF of improvements. Great for poultry, beef, seafood processors.
- Anderson St- 11,000 SF building with freezers, coolers and truck high loading.
- Industrial St- 23,000 SF building with 6000 SF freezer and 1200 SF cooler and 7 dock high spots.
- 6th St- 23,000 SF concrete building with 3000 SF cooler and 1100 SF freezer, 16 truck high positions and 22 foot clear.
- Alameda St- 15000 SF building with 8000 SF cooler and 4 dock high spots. Great location for produce distribution.
- Alameda St- 16000 SF building with 4000 SF of coolers and freezers and processing room. 3 truck high spots.
- Spring St- U.S.D.A. federal inspection facility for poultry and meat processing with coolers and freezers. 17000 SF building.
- Triangle Dr- 23000 SF building, former commercial bakery with coolers, freezer and processing rooms.