The industrial vacancy rate in Los Angeles has remained steady at 2 percent over the 12 months through second quarter 2017, keeping Los Angeles the tightest industrial market in the nation, according to NAI Capital.
Industrial rents in Los Angeles have seen unprecedented growth this cycle, experiencing year-over-year rent growth for the past five years. Average asking rents closed the quarter at $0.78 per square foot, up 2.7 percent from the previous quarter and up 6.8 percent from this time in 2016.
Demand is driven by a strong economy as well as cargo volume from the ports of Los Angeles and Long Beach. In the first five months of 2017, more than 6.5 million twenty-foot equivalent units have filtered through the two ports. Combined import volume for 2017 year-to-date is up 5.3 percent from this time last year. Consumer demand for imported goods is driving the increased cargo volume and is expected to continue to push demand for warehouse distribution space.
Industrial leasing volume in the Los Angeles market during the second quarter was down, as a minimal vacancy rate leaves few opportunities for leasing, reports NAI Capital. The total lease volume in the second quarter was 7.7 million square feet, for a total of 16.7 million square feet for first half 2017.
More than 6.8 million square feet of industrial space were sold during the second quarter, an increase of 13.6 percent from the previous quarter and 29.6 percent more than 2016 at this time. NAI Capital expects rents to continue to rise while new construction deliveries will not be enough to relieve the demand.