The Mid-Counties industrial market, after six consecutive quarters of positive net absorption, is seemingly out of available space.
The market is centrally located in the Southern California region of Los Angeles, Orange, Riverside, San Bernardino and Ventura counties, and outside the congestion of the downtown L.A. core. It continues to be the first choice of many industrial users and has a strong and diverse labor pool; modern functional industrial base; and a clean and safe environment.
The Mid-Counties market encompasses approximately 134 million square feet.
Supply
Levels of supply decreased to all-time lows of 2% available and 1% vacant in the third quarter. The year-over-year decline in the supply of available buildings was 63%.
Gross activity continued to outpace supply, with 2.4 million square feet generated during the quarter, bringing the year-to-date total to 6.7 million square feet as compared to a current available inventory of 2.7 million square feet.
Property values are increasing, given the dynamics of limited supply and strong demand. The average asking lease rate increased 8.8%, and the average asking sale price increased 6.8% year-over-year.
The Mid-Counties market is starving for new space, but land is scarce in the infill market.
Projects
Overton Moore Properties recently broke ground on an 8.9-acre site in La Mirada, where it plans a state-of-the-art, 199,588-square-foot building.
Goodman Birtcher will break ground on the former Cenco (Powerine) Refinery to develop three buildings totaling 1.2 million square feet in three consecutive phases. Both projects are seeing preleasing activity.
Investors were also clamoring for space in the market during the quarter.
Rexford Industrial closed on a 58,020-square-foot multitenant industrial center in Santa Fe Springs, and most recently, Westcore Properties acquired a portfolio from MetLife, including the 301,196-square-foot Village Business Park in Buena Park and a single-tenant, 80,000-square-foot building in La Mirada.
Five investment sales in one quarter are more than usual, though there remain more buyers than sellers in the market.
Confidence, Urgency
We enter the fourth quarter with more confidence in the national economy and continued low interest rates. There’s a sense of urgency among occupiers and investors that promises to push the Mid-Counties submarket to new high valuations.
McGeagh is a senior vice president at CBRE.
