Q3 2022 Industrial Real Estate Report: Los Angeles, CA
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
In Los Angeles, nearly 90,000 jobs were lost over Q2 2022, while unemployment held steady at around 4.5% this quarter.
Led by South Bay and San Gabriel Valley submarkets, both posting 800,000 square feet of positive absorption, overall net absorption was up for another quarter, now nine in a row.
While the vacancy rate of Los Angeles’ industrial real estate market increased this quarter by 20 basis points, it still sits under 2%, maintaining one of the lowest rates in the United States.
General Area Overview & Demographics
Los Angeles is the largest city in the state of California, with an estimated population of nearly 4 million people.
Boasting a diverse population, it possesses one of the most racially and ethnically diverse urban populations in the United States. There’s a wide range of age demographics that range from young to old, with 18.5% being under the age of 18 and 11.1% over 65 years old.
Los Angeles is also home to many immigrants, making up nearly 33% of Los Angeles’ population. Los Angeles is characterized by its expansive size, ranging from beachfront communities to sprawling suburbs, and its mild climate makes it one of the best places to live year-round in the US.
Los Angeles is famed for its cultural diversity and entertainment industry, which helps bring various talents into industrial real estate opportunities in Los Angeles County.
Los Angeles’s Large Metropolitan Area
In addition to its large population, Los Angeles also has an incredibly large metropolitan area encompassing more than 12 million people across Los Angeles County alone. The Los Angeles metropolitan area extends beyond the county boundaries through areas such as:
- Orange County (4 million);
- Riverside (2 million);
- San Bernardino (2 million); and
- Ventura (1 million).
Los Angeles is home to some of the finest colleges and universities in the United States. Los Angeles County alone boasts over two dozen community colleges, more than 40 universities, and several top-rated private institutions.
With an estimated 1.6 million students enrolled in Los Angeles County educational institutions, Los Angeles’ educated population provides a highly-skilled workforce that is attractive to businesses.
Los Angeles is known for its pleasant climate and warm weather, with temperatures typically ranging from the low 50s to the mid-70s Fahrenheit. Los Angeles enjoys around 300 days of sunshine a year, making it ideal for outdoor and industrial activities.
Los Angeles has two main seasons; the summer months are typically warm and dry, while the winter months can be cool with higher rainfall.
Summary of Los Angeles industrial Real Estate Performance in Q3 2022
Following a period of turbulence, the Los Angeles industrial market is regaining stability. Warehouse demand seems to be slowing down in other markets yet remains strong in LA as rents continue to climb and developers ramp up construction projects in response.
Industrial real estate in Los Angeles has seen growth since the beginning of 2022. Completed construction increased by 35%, adding 3 million square feet to the market in Q3 alone, not to mention an additional 5 million square feet still under construction this quarter.
Available industrial space rose 13% quarter-over-quarter, marked by an increase of 3.5% when compared to last year, with 5.5 million square feet added to inventory.
What are industrial rents like in Los Angeles?
Average asking rents rose to $1.60 per square foot, a 6% increase from last quarter, with the Central submarket increasing by 9%.
In Los Angeles’ industrial market, commerce leads the way with the highest asking rate at $1.68 due to the submarket’s large population of food manufacturing tenants.
Purchase & Leasing Activity
Sales volume year-over-year rose nearly 45%, bringing in more than $2 billion in sales. Compared to Q3 2021, there was a decrease down to 4% in investment sales’ average cap rate.
While leasing deals totaled just over 20 million square feet, the supply of completed construction stayed below leasing activity.
Notable industrial Real Estate Deals in Los Angeles in Q3 2022
This quarter, the following office deals and leases occurred in Los Angeles’ industrial market.
- NHN Global’s acquisition of 101,000 square feet for $33.5 million;
- Alere’s acquisition of 40,000 square feet for $22 million;
- Pacific Logistics’ leasing of 200,000 square feet; and
- DHE’s leasing of 170,000 square feet.
These are a few among other transactions that took place for industrial real estate in Los Angeles.
New industrial Real Estate Development Activity in Los Angeles in Q3 2022
As demand holds steady, the third quarter saw the delivery of several new properties, the largest of which is Home Depot’s 530,000-square-foot warehouse.
Two other projects are set to be completed in Q4 2022, both in Vernon’s submarket. One is a 145,000-square-foot property by developer Pacific Industrial, and another is a 58,500-square-foot property by developer North Palisade Partners.
Market Forecast for Los Angeles’s industrial Real Estate Market
Industrial real estate in Los Angeles remains competitive, with the city possessing one of the nation’s lowest vacancy rates and with rental prices on an upward trajectory.
In 2022, limited and antiquated industrial facilities led to subdued levels of net absorption. As a result, tenants’ leasing potential has been restricted due to the small amount of space available.
Tight industrial real estate market conditions and economic concerns will remain in Los Angeles for the remainder of 2022.
Takeaways for industrial Real Estate Investors
Los Angeles’ industrial real estate market holds possibilities for investors looking for a competitive market with indications of a return.
There’s opportunity with low vacancy, high demand, and rising rental rates. Yet, the risk is also present with a tight construction pipeline and uncertain economic conditions.
As always, each investor must do their own research to decide what’s best for them and their particular situation.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
Find Industrial Real Estate in Los Angeles, CA With the Help of an Experienced CRE Agent or Broker
MyEListing.com maintains one of the largest national directories of commercial real estate agents & brokers in the country. Use it for free to find an agent or broker in Los Angeles, CA.
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