Southern California’s economy continues to slow as the housing downturn has been full swing for a few quarters. However, the following industries have been growth drivers: retail trade, transportation, warehousing and logistics, administrative and support, leisure and hospitality, and professional, scientific and technical services. Even with falling single-family home prices, tighter mortgage underwriting standards, and increasing residential notices of default and foreclosures, the industrial real estate markets continue to remain stable in sales prices and rental rates. Though industrial economics remain flat, transactions numbers and absorption values are half the numbers from a year ago.
Category Archives: Market Trends & Indicators
Market trends, leading or lagging indicators. As it relates to industrial property.
Redevelopment Boundary Moved South in Arts District
The Los Angeles City Council last week approved a plan to expand the southern boundary of the Arts District, paving the way for redevelopment of the industrial area between 6th and 7th Streets just west of the river. This area includes a scattering of modern warehouses amongst mostly older and sometimes multistory brick warehouses built in the 30’s and 40’s. New residential grown in the current industrial area is expected. Councilman Huizar proposed the modification to the former boundary set by the Planning Commission and CRA.
Employment Steady with Slight Downtrend
The California Employment Development Department (EDD) released January unemployment estimates last week. Seasonally adjusted, the Los Angeles County unemployment rate was 5.7%, up from 5.4% in December, from 5.3% in November, and from 4.7% a year earlier. January was the eighth consecutive month that the County’s unemployment rate increased over the previous year. Last month’s County unemployment rate was the highest since February 2005 (5.7%). Historically speaking, 5.7% is not high and poses no immediate threat to the industrial real estate market.
Commercial Loan Tightening
Standards for commercial real estate loans were tightened by a whopping 80% of responding banks. About 46% of banks reported that demand for CRE loans has weakened.
Commercial & industrial loan credit standards and lending terms have been tightened by 32% of banks for large-and mid-size business customers and by 30% of banks for small business clients. Here also, loan demand has weakened. The pool of buyers has decreased and thus demand has further decreased.
Intermodal Facilities
Los Angeles has one of the largest and busiest ports in the United States. Development of intermodal facilities, where shipping containers are transferred between rail and trucks, and adjacent logistics parks is a trend that is being seen across the country. Intermodal container shipments increased 37% in the last 5 years. The vast majority of goods manufactured in Asia arrive in ports on the west coast. This trend is changing the face of the bulk distribution sector. For more information on the Port of Los Angeles.