Category Archives: Market Trends & Indicators

Market trends, leading or lagging indicators. As it relates to industrial property.

Market Trends & Indicators

The City of Vernon And Its Industries

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city-of-vernon-aerial1

The City of Vernon is the smallest among the cities of Los Angeles County when ranked by geographic area or population. The city’s economic impact, however, is far larger than one might expect. Indeed, as one of Los Angeles County’s “industrial cities” – along with the Cities of Commerce and Industry – Vernon is a vital economic center.

Given its industrial profile, Vernon plays its biggest role in the Food Manufacturing area. Vernon-based food product companies employ almost 10,700 workers, more than 15% of the Los Angeles County total for this group. Vernon also plays an important role in the region’s Fashion–Apparel and Textile Design/Manufacturing/ Wholesale industry cluster, with more than 11,200 employees or 10.66% of the L.A. County total.

Other regional industry clusters in which Vernon plays a large role include Furniture and Home Furnishings (with an employment share of 5.53%), Fabricated Metal Products and Industrial Machinery (with 3.4%), Toys (with 2.4%), Auto Parts (also 2.4%), and Wholesale Trade and Logistics (with nearly 2%).

Vernon, due to its historic role as a meat packing center, has long been home to a variety of animal waste processing and rendering industries. Rendering, for those who don’t know, is a process that converts waste animal tissue into stable, value-added materials such as lard, tallow or bone meal. Rendering can refer to any processing of animal byproducts into more useful materials, or more narrowly to the rendering of whole animal fatty tissue into purified fats.

Sources: City of Vernon, California Employment Development Department (QCEW data series), LAEDC.

Market Trends & Indicators

Labor Market Update – Continued Gloom Along with Other Indicators

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USA-IMMIGRATION/AMERICANAPPARELThe Bureau of Labor Statistics released its latest U.S. Labor Market Report on Friday, covering the U.S. employment situation in December, and the news was depressing.  Total nonfarm employment fell by -524,000 jobs in December, and the job losses in October and September were revised down to -584,000 jobs and -423,000 jobs respectively.  In percentage terms, employment has declined by -1.12% in the last three months.  This was the biggest three-month decline since mid 1980 and before that, the first three months of 1975 (Both years saw severe recessions).

Leading Economic Indicators

The manufacturing and construction sectors continued to shrink, with job counts plunging by -791,000 jobs and -632,000 jobs respectively compared to December 2007.  In manufacturing, about 46% of the total job losses came in just four sectors:  motor vehicles & parts (-162,000 jobs and counting), furniture manufacturing (-71,000 jobs), wood products (-76,000 jobs), and textiles & apparel (-56,000 jobs).

Labor market conditions have deteriorated significantly in recent months, and the damage is spreading rapidly.  About 55% of the jobs lost during 2008 were in manufacturing and construction.  However, that share has been dropping recently, as jobs are disappearing in almost all sectors of private industry (except health services, private education, and mining).  The nation’s unemployment rate hit bottom in March, 2007 at 4.4%, when 6.7 million workers were jobless.  By last month, the number of workers without a job had grown to 11.1 million, an increase of 4.4 million unemployed.  The nation’s labor markets are quite troubled, and more bad news is likely in the next few months.

Although these data are countrywide, the Southern California and Los Angeles economies are not unlike them.  These leading indicators are likely an omen of decline for the local warehousing and manufacturing industries and the real estate they occupy.

Market Trends & Indicators

Market Update – Q4 2008

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untitled-1Deceleration.  Real estate industry investors and professionals expect financial and real estate markets in the United States to bottom in 2009 and flounder for much of 2010, with ongoing drops in property values, more foreclosures and delinquencies, and a limping economy that will continue to crimp property cash flows, according to the Emerging Trends in Real Estate 2009 Report.

Losses are projected in real estate values from their 2007 peaks.  The lack of real estate financing will prevent us from finding the bottom of the market.   However, the Central Los Angeles industrial real estate market is not expected to suffer as much as other industrial markets not only in Southern California but also across the country.

Despite an increase in vacancy rate,  the Central Los Angeles industrial real estate submarket continues to maintain the lowest vacancy rates for the nation, despite a decline in demand.  Other commercial sectors such as multi-family, office and retail will suffer a far worse fate in the coming 12-24 months.  We do expect continued softening in values as demand from buyers and tenants has fallen off substantially.  Many companies report revenue drops in the range of 30 to 40 percent for 2008.  More properties continue to become available providing a better selection for those who need such space.

The consensus is that the problems which have plagued the second half of 2008 will persist, and possibly worsen into 2009. Consumers have significantly scaled back spending and the reverberations are filtering down all the way to the Los Angeles industrial market as retailers cut their orders for merchandise that once filled warehouse distribution centers to capacity.

The impact of lagging activity will show up in the asking rents and in the increasing levels of available sublease space, especially in industrial markets along the ports’ distribution path. What is unique about thisdownturn is the increase in available warehouse/distribution sublease space. Asking rates will dip as vacancy increases moderately. However the largest concern facing the market in the coming year is how long the national downturn will last and how widespread its effects will be.

As economic specialists scratch their heads in Washington, the rest of the nation and world is forced to wait and see. Because of the overarching economic issues, vacancy will increase a half point and absorption will remain negative in 2009, as rents see a 6-8 percent decrease.