Q1 2023 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' industrial real estate market experienced stunted performance in Q1 2023 as a raft of economic headwinds continued to challenge the sector.
In addition to an entertainment industry bolstered by the presence of Hollywood, Los Angeles is also home to major sectors such as technology, aerospace, fashion, tourism, and international trade.
The population in Los Angeles is currently at around 12.5 million at a 0.37% growth rate.
General Area Overview & Demographics
Los Angeles is well known across the globe as an exciting and opportunisitc city located in the southern part of California, United States. With its sunny climate, stunning beaches, and a wide range of cultural and entertainment offerings, LA has established itself as a global metropolis and a center for arts, business, and tourism.
The Economy, Population, & Geographic Makeup of Los Angeles
Home to over 4 million residents, Los Angeles is the most populous city in California and the second most populous city in the United States, following New York City. Its residents, commonly known as Angelenos, come from a rich tapestry of backgrounds, making LA a true melting pot of cultures. The city attracts people from all over the world, resulting in a diverse population and a vibrant multicultural atmosphere.
Despite its large population, renters in Los Angeles tend to pay large portions of their income towards their monthly payments. The city is also one of the most expensive to live and work in.
The demographics of Los Angeles reflect this diversity. According to recent estimates, the city's population consists of various ethnic and racial groups. Hispanics or Latinos make up the largest ethnic group, accounting for about 49% of the population. The next largest groups are non-Hispanic Whites (28%), followed by African Americans (9%), Asians (11%), and people of other races or mixed-race backgrounds.
In addition to its cultural diversity, Los Angeles is also known for its thriving entertainment industry, including Hollywood, which is considered the global capital of the movie and television industry. Many aspiring actors, musicians, and filmmakers flock to LA in pursuit of their dreams, further adding to the city's unique character.
The city's economy is highly diverse and encompasses a wide range of sectors, including entertainment, technology, aerospace, fashion, tourism, and international trade. Major companies and institutions have established their presence in Los Angeles, contributing to its economic growth and providing employment opportunities.
Los Angeles offers a wide array of attractions and landmarks for both residents and visitors. From iconic sites such as the Hollywood Sign, Walk of Fame, and Griffith Observatory to world-class museums like the Getty Center and the Los Angeles County Museum of Art, there is something for everyone to enjoy. The city's beautiful beaches, such as Santa Monica and Venice Beach, attract tourists and locals alike, offering recreational activities and stunning coastal views.
Summary of Los Angeles Industrial Real Estate Performance in Q1 2023
Vacancies for Los Angeles industrial real estate increased to 2.0% in Q1 2023. Los Angeles' South Bay submarket posted the highest industrial vacancy in the area at 2.5%.
About -2.6 million square feet of industrial absorption occurred in the city by the end of Q1 2023.
What are industrial real estate rents like in Los Angeles?
Asking lease rates for Los Angeles industrial real estate climbed to $1.69 per square foot in Q1 2023. Rates were highest in the South Bay submarket at $1.98 per square foot.
The Greater San Fernando Valley submarket posted the highest quarter-over-quater rental increase, with rates rising by 4.5% to $1.69 per square foot.
Purchase & Leasing Activity
Sales volume for Los Angeles industrial real estate decreased 75% quarter-over-quarter to $1.5 billion. Leasing volume increased by 22.6% quarter-over-quarter to 10.3 million square feet.
Notable Industrial Space Deals in Los Angeles in Q1 2023
There were several notable deals that took place for Los Angeles industrial real estate in Q1 2023:
- CBRE Investment Management purchased 4 properties for $539 million at $604 per square foot.
- GI Partners purchased two properties on Culver Blvd. for $210 million at $999 per square foot.
- Furniture of America leased 472,000 square feet in City of Industry.
- Weida Freight Systems leased 274,000 square feet in City of Industry.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Los Angeles in Q1 2023
Approximately 480,000 square feet of new industrial real estate were delivered to Los Angeles' market in Q1 2023. The majority of these deliveries were in the South Bay submarket.
About 8.13 million square feet of new space were in the pipeline by the end of Q1 2023.
Market Forecast for Los Angeles' Industrial Space Market
Economic strain across the nation will likely slow Los Angeles' industrial real estate market as the year progresses. Many tenants are feeling this economic pressure and vacating to smaller spaces or looking to renegotiate lease terms with more favorable improvement allowances and lease concessions.
Should this trend continue, vacancies could increase and drive absorption further into the red.
Takeaways for Industrial Real Estate Investors
Investors should note that banks are putting tighter restrictions on lending considering the current economic climate. Many investors have paused their endeavors in anticipation of a continuing recession and rising inflation.
Do your research, stay diligent, and happy investing.
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