LA Market Quarterly Overview: Industrial / Third Quarter 2008 / Quarterly Change - Pg 1
Los Angeles County accounts for nearly 9 million
people in the Southern California commercial real estate
market, occupying 180 million sq.ft. of office space and
900 million sq.ft., of industrial space. Office and industrial
space make up the backbone of the professional and industrial
base that houses the southern California economy. As the
economy fluctuates, national market indicators, such as
employment figures, can affect the local economy and for
example, jobs are gained or lost. Likewise, the need for
office or industrial space follows these trends, albeit
with some lag. By following these market indicators, you
as a tenant in the can position your purchasing power to
your advantage and make market conditions work for you!
Key indicators include:
Los Angeles is a composition of seven distinct sub-markets
for office and industrial space including: Downtown Los
Angeles, the Tri-Cities, the West Side, Mid-Counties, San
Fernando Valley, San Gabriel Valley and South Bay. Each
sub-market is again divided into territories that include
superior locations and less preferable ones. On a product
level, office and industrial buildings range from "A"
Class to "C" class ("A" being most desirable)
with newer buildings (Construction) often providing state
of the art facilities and amenities that demand a higher
market leasing rate.
By comparing the year-on-year percentage changes in the
four key indicators, a tenant can project how landlords
in the market may react, more or less favorably, to a proposal
to lease space. Keep these four key indicators in mind when
researching local markets to position your company in the
best light and take advantage of the market!
OVERVIEW
Los Angeles's Vacancy Increases to 3.6% Net Absorption Negative (2,203,599) SF in the Quarter.
The Los Angeles Industrial market ended the third quarter 2008 with a vacancy rate of 3.6%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (2,203,599) square feet in the third quarter. Vacant sublease space increased in the quarter, ending the quarter at 4,661,536 square feet. Rental rates ended the third quarter
at $8.78, an increase over the previous quarter. A total of 21 buildings delivered to the market in the quarter totaling 984,493 square feet, with 2,967,578 square feet still under construction at the end of the quarter..
ABSORPTION
Net absorption for the overall Los Angeles Industrial market was negative (2,203,599) square feet in the third quarter 2008. That compares to negative (4,201,132) square feet in the second
quarter 2008, negative (1,736,622) square feet in the first quarter 2008, and positive 4,224,701 square feet in the fourth quarter 2007.
Tenants moving out of large blocks of space in 2008 include: Kuehne + Nagel moving out of (220,000) square feet at 15927 Distribution Way, ServiceCraft Logistics moving out of (171,119) square feet at 1650 E Glenn Curtiss St, and OKK Trading Inc. moving out of (170,000) square feet at Telacu Industrial Park.
Tenants moving into large blocks of space in 2008 include: Deckers Outdoor Corporation moving into 423,555 square feet at 3175 Mission Oaks Blvd, DHL Exel Supply Chain moving into 213,544 square feet at 3015 E Ana St, and Mission Foods moving into 200,004 square feet at 14200 Arminta St.
The Flex building market recorded net absorption of negative (186,624) square feet in the third quarter 2008, compared to negative (326,678) square feet in the second quarter 2008, positive
217,987 in the first quarter 2008, and positive 502,339 in the fourth quarter 2007.
The Warehouse building market recorded net absorption of negative (2,016,975) square feet in the third quarter 2008 compared to negative (3,874,454) square feet in the second quarter
2008, negative (1,954,609) in the first quarter 2008, and positive 3,722,362 in the fourth quarter 2007.
LARGEST LEASE SIGNINGS
The largest lease signings occurring in 2008 included: the 723,555-square-foot deal signed by Deckers Outdoor Corporation at 3001 & 3175 Mission Oaks Blvd in the Ventura County market; the 506,580-square-foot lease signed by BCBGMAXAZRIA at Sears in the Vernon Area market; and the 350,000-square-foot lease signed by Maersk Distributing Center at 18215 E Rowland St in the Lower SGV market.
SUBLEASE VACANCY
The amount of vacant sublease space in the Los Angeles market increased to 4,661,536 square feet by the end of the third quarter 2008, from 3,844,706 square feet at the end of the second quarter 2008. There was 2,508,666 square feet vacant at the end of the first quarter 2008 and 2,504,257 square feet at the end of the fourth quarter 2007.
Los Angeles's Flex projects reported vacant sublease space of 440,833 square feet at the end of third quarter 2008, up from the 414,020 square feet reported at the end of the second quarter 2008. There were 311,934 square feet of sublease space vacant at the end of the first quarter 2008, and 333,245 square feet at the end of the fourth quarter 2007.
Warehouse projects reported increased vacant sublease space from the second quarter 2008 to the third quarter 2008. Sublease vacancy went from 3,430,686 square feet to 4,220,703
square feet during that time. There was 2,196,732 square feet at the end of the first quarter 2008, and 2,171,012 square feet at the end of the fourth quarter 2007.
