Industrial Market
In the second quarter, the industrial base in Los Angeles County swelled another 7 million square feet to 867 million square feet, second in the U.S. only to the Chicago market in total industrial square footage.
Demand for industrial space remained strong. Activity jumped 20% from the first quarter, reaching 12.4 million square feet. Leading the way were Glendale, Los Angeles, San Fernando Valley and South Bay, which realized quarterly increases of more than 65%.
Because of the large volume of new construction entering the market, the availability rate increased slightly in the second quarter to 5.5%. Over the past five years, the availability rate has dropped 35%. Meanwhile, industrial vacancy felt the same pressure and inched up a slight 0.1% in the second quarter, to 3.4%. Approximately 55% of that increase can be attributed to completions.
The average asking lease rate increased 3 cents from the second quarter of 1999. New construction increased 5% from the first quarter, to 10.6 million square feet. Compared with the same quarter last year, square footage under construction was up 27%.
Office Market
During the second quarter, the Los Angeles County office market base grew 4 million square feet, posting a 3% increase. Demonstrating the strength of the Los Angeles office market in the second quarter, several market indicators achieved their highest levels in 10 years, sustaining the momentum developed in the first quarter.
Year-to-date net absorption of 3.8 million square feet outpaced 1999 by 3.1 million square feet. Net absorption in Los Angeles from 1995 through mid-year 2000 totaled nearly 18 million square feet. West Los Angeles, South Bay, Glendale, and San Gabriel Valley accounted for 97% of the second quarter’s total net absorption.
Vacancy rates declined to a 10-year low of 10.5%, dropping 0.8 point from the first quarter. Glendale and South Bay experienced the most dramatic changes in vacancy over the past 12 months declining more than 4 percentage points.
Average Los Angeles vacancy rates plummeted 17% in the same period. West Los Angeles and Glendale sustained single-digit vacancy rates of 3.9% and 5.4%, respectively, in the second quarter. The average asking lease rate rose 3 cents (2%) reaching an all-time high for Los Angeles County of $1.83. In the past 12 months, three of seven submarkets produced gains in the average asking lease rate of more than 7%. Construction activity increased 8.8% over the first quarter to a robust 3.5 million square feet, another 10-year high.
