Q4 2022 Industrial Space 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.
Los Angeles is home to several notable company headquarters, including The Walt Disney Company, Warner Bros., and Universal Pictures.
The unemployment rate for the city was at 4.4% in Q4 of 2022. The population of the metro area of Los Angeles reached 12,488,000 in 2022.
In Q4 2022, Los Angeles’ industrial real estate market saw increased deliveries, positive absorption, and rising average asking rents.
General Area Overview & Demographics
Approximately 48% of Los Angeles’ population identifies as Hispanic or Latino, 28% as White, 10% as African American, 9% as Asian, and 1.5% as Native American or Indigenous.
Los Angeles Median Household Income & Population
In 2022, Los Angeles County’s median income for a four-person household was $91,000. This was a sharp increase from 2021’s figure of $80,000. The city is one of the most expensive to live and work in.
The median age in the city is 34.8 years old. This makes Los Angeles one of the youngest major cities in the US. Approximately 28% of Los Angeles’ population is between the ages of 20-39, 25% is between 40-59, 19% is 18 or younger, and 17% is age 60 or older.
Los Angeles is home to many higher education institutions, including the University of California, Los Angeles (UCLA), the California State University system, and numerous smaller community colleges.
Many well-known attractions and landmarks are found in the city, such as the Hollywood Sign, Universal Studios Hollywood, the Getty Center, Griffith Observatory, and the Santa Monica Pier. The city also offers plenty of unique shopping experiences on Rodeo Drive in Beverly Hills, Third Street Promenade in Santa Monica, and Melrose Avenue in West Hollywood.
Los Angeles has a warm, Mediterranean climate with mild winters and hot summers. Average temperatures range from lows of 48°F in January to highs of 87°F in August. The city does not experience much rainfall throughout the year, with an annual average of only 8 inches.
Summary of Los Angeles Industrial Real Estate Performance in Q4 2022
Industrial vacancies in Los Angeles rose quarter-over-quarter to 0.9%. The San Gabriel Valley submarket had the highest vacancy at 1.3% in Q4.
Industrial net absorption for the quarter reached 8 million square feet, bringing the year-to-date total to nearly 21.9 million square feet.
Absorption was highest in the Inland Empire submarket at nearly 16.6 million square feet, while Central Los Angeles saw the lowest absorption at -377,437 square feet.
What are industrial rents like in Los Angeles?
The average direct asking rent rose to $1.69 per square foot in Q4 2022. This was a $0.01 increase from the previous quarter.
Rent was highest in the South Bay submarket at $2.04 per square foot while the San Fernando Valley and Ventura County submarket posted rates at $1.46 per square foot.
Purchase & Leasing Activity
Industrial sales activity in Los Angeles for Q4 2022 reached nearly 2.2 million square feet at $281.86 per square foot. This cost per square foot was a slight decrease from Q3’s average rate.
The Inland Empire submarket posted the highest sales volume at 1.2 million square feet sold in Q4 2022.
Leasing activity saw nearly 12.2 million square feet of deals in Q4.
Notable Industrial Real Estate Deals in Los Angeles in Q4 2022
There were several notable deals that took place for Los Angeles’ industrial real estate in Q4 2022:
- Prologis purchased three properties totaling 1.5 million square feet for $355.9 million.
- Rexford Industrial Realty purchased 148,186 square feet for $100 million.
- Ryder Logistics leased 1 million square feet in City of Industry.
- GXO Logistics leased 411,034 square feet in Santa Fe Springs.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Los Angeles in Q4 2022
Q4 2022 brought 9.8 million square feet of new industrial supply to Los Angeles.
Total industrial inventory in Los Angeles for the year reached nearly 1.7 billion square feet.
There were 47.7 million square feet under construction in Q4 2022. The majority of this construction was found in the Inland Empire submarket.
Market Forecast for Los Angeles’ Industrial Real Estate Market
Since Los Angeles is one of the busiest ports in the world, an increasing need for newer and better facilities is expected in the future amidst the city’s current status as a higher-risk investment location.
August 2023 will see the completion of several new developments currently in the pipeline.
Expect vacancies to continue to open up as buyers look to move to newer, higher-quality spaces.
Takeaways for Industrial Real Estate Investors
Investment sales have continued to increase steadily in recent years in the Los Angeles industrial real estate market. 2022 saw an increase in investment sales by 26.7% year-over-year from 2021. Price per square foot also increased by 18.4% over the past year.
Capitalization rates have remained steady throughout 2022 and recent years, averaging around 4.3% in this past year. Expect interest rates and construction costs to continue to rise in the coming year.
Do your research, stay diligent, and happy investing.
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