By MICHAEL FOLEY
Industrial availability in mid-counties, which straddles the border of Los Angeles and Orange counties, continues to move lower despite an overall slowdown in deal velocity.
The lack of quality industrial sites for sale or for lease continues to hurt the volume of deals marketwide. Lack of developable industrial sites has led to a modest amount of new construction, which in turn has reduced the amount of quality space for users in the market.
Good news for property owners is that rental rates and sale prices continue to rise. A significant portion of the overall absorption and rental growth this year has been the result of renewals and expansions of existing tenants.
Gross activity in the third quarter increased 38% from the second quarter at 1.4 million square feet to 1.9 million square feet, which is comparable to the same period last year at 1.95 million square feet. A disproportionate amount of the activity in the third quarter was for buildings larger than 100,000 square feet, totaling 846,232 square feet in only four deals. That represented a 108% increase year-over-year.
User sale activity registered the greatest decrease year-over-year, down 45%. The total number of sale and lease deals in the third quarter was only 38 versus 56 last year, a 32% drop. Once again, the decrease in sale and lease transactions can be attributed in large part to the lack of supply.
At the end of the third quarter the overall available rate dropped to an all-time low of 3.4%. This is down from 3.8% in the second quarter, and 4.9% at the same period a year ago. Following this trend, the actual vacancy rate came down to 1.6%; down slightly from the 1.8% in the second quarter and also down from the 2.1% a year earlier.
Credit and housing problems continue to plague the economy. Manufacturing and other businesses are feeling the ill effects of the housing and credit problems. Demand for manufactured goods such as machinery, cars and appliances plunged in August by the largest amount in seven months, the government recently reported.
“The big question is does all the craziness in the financial markets because of credit and housing problems change the behaviors of consumers and businesses?” asked economist Ken Maynard, president of ClearView Economics. “The biggest dangers are that consumers and businesses clam up.”
The geographic advantages for leasing and owning in the mid-counties will keep buildings in that area safe from an economic slowdown. Small and large companies understand the significance of managing transportation costs and appreciate the real value of locating within the 132 million-square-foot mid-counties industrial submarket with the advantages of immediate access to the ports of Los Angeles and Long Beach and surrounding airports.
Foley is a senior vice president in the Commerce office of CB Richard Ellis.
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