San Gabriel Valley/Los Angeles Industrial Market
Across the country, industrial real estate is leading activity in development, acquisitions, and transactions. Due to COVID changing the way we live, do business, and purchase goods during the pandemic, e-commerce has increased significantly. It has created a substantial increase in dependence for the delivery of products in a timely manner. This has resulted in higher demand for warehouse and distribution space throughout the country. This increase helped to offset a pullback by manufacturers, retailers, and other firms forced to close during the shutdown. The areas that continue to expect consistent growth include logistics, distribution, fulfillment, cold storage, and data center storage.
The vacancy rate for the greater Los Angeles industrial market increased slightly but still remains historically low at approximately 2.5 percent. However, the market experienced increased rents this quarter from the previous quarter. It has been difficult for tenants to find space under 20,000 square feet. The San Gabriel Valley market is maintaining a low vacancy rate of two percent. There are 1.9 million square feet under construction, mainly in Azusa and El Monte. However, most projects in recent years have been pre-sold or pre-leased prior to completion.
The Inland Empire was third in leasing volume in the country for the first half of 2020 with 18.2 million square feet leased. The vacancy rate hovers at about four percent and is expected to remain low with demand for mid to big-box deliveries outpacing new construction. Approximately 16 million square feet is under construction.
Source: Connect Commercial Real Estate newsletter and CoStar Newsletter July 14, 2020
San Gabriel Valley/Los Angeles Office Market
Retail, restaurants and hotels are expected to have the largest hit on both vacancy and rents from the fallout. According to CoStar analytics, the LA retail markets experienced the lowest activity levels since the pandemic began in late March during a single month since their dataset began in 1996. Another factor that will affect retailers and restaurants even after they reopen will be limits on capacity and loss of scared consumers who do return to stores and restaurants initially.
The LA office market was experiencing vacancies near a decade low. Since the end of March, the leasing activity has decreased significantly reaching the lowest levels of activity since CoStar began tracking in 1996. Vacancies are expected to increase to levels higher than the recession of 2008. This trend is expected to continue through the middle of 2021 and begin to improve at a moderate rate. The office sale market in LA saw a forty percent decrease in volume in March and April from the previous year.