The Greater Los Angeles industrial market outperformed most of the U.S. in 2012, with vacancy and availability rates down from their respective recessionary peaks, and average asking rates on leases stabilizing after a long downward trend.
Industrial demand returned to the market in 2010 and 2011 and continued to gain momentum in 2012, especially for class A industrial buildings of more than 100,000 square feet.
The fourth quarter added to the momentum, with 2.4 million square feet of positive net absorption, bring the total for 2012 to 6.9 million square feet. All eight submarket areas saw positive net absorption during the fourth quarter, with the highest total occurring in the San Gabriel Valley, with 551,000 square feet, followed by Greater San Fernando Valley, with 457,000 square feet.
The industrial market posted 13 million square feet of gross activity in the fourth quarter, a gain after three straight quarters of gross activity totaling between 10 million and 11 million square feet.
The activity was evenly distributed during the fourth quarter, with 56% in the 10,000-square-foot to 100,000-square-foot size range, and the rest spread over larger buildings.
The pickup in activity put the vacancy rate for industrial space at 2.5% in the fourth quarter, down from 3.2% a year earlier.
Office Market
The Greater Los Angeles office market continued to improve during 2012, a trend that is expected to continue during the near term as the overall economic landscape improves and stirs activity among tenants.
Concerns about the cost of doing business and the overall political picture in California remain concerns for some prospective buyers and tenants, so expect near-term growth to come at a measured pace.
Overall tenant demand in the region is fairly modest, although some submarkets such as West Los Angeles are seeing stronger activity thanks to a strong base of technology companies.
The office market overall posted a solid 645,000 square feet of positive net absorption for 2012, but tripped up at year’s end, when it went the other way with 988,000 square feet of negative net absorption. It was the first quarter of negative net absorption since early 2011, and much of the turn could be attributed to Walt Disney Co.’s move to vacate 640,000 square feet of office space in Burbank and North Hollywood.
That brought the vacancy rate up to 17.4% from 16.9% the prior quarter. It’s still down 17.4% from 17.8% a year earlier.
—Analysis provided by CBRE Research.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
