A Comprehensive Guide to Buying Warehouses for Sale in Los Angeles
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.
Known for its sunny shores and thriving entertainment scene, Los Angeles is the second-largest city in the country, with a GDP that nearly surpasses $1 trillion. Whether you're a business owner or investor looking to buy a warehouse for sale, Los Angeles can be a great pick as one of the largest transportation and manufacturing hubs in the US.
Here, we'll cover the fundamentals of what you need to know before buying warehouses for sale in Los Angeles. We'll discuss some facts about Los Angeles zoning as well as taking earthquake considerations into account.
Let's get started.
Los Angeles Warehouse Zoning
Warehouses and other types of flex industrial space in Los Angeles fall under the M-1 and M-2 zoning designations, which account for the following types of land uses:
- Business offices;
- Machine shops;
- Warehouses;
- Manufacturing centers;
- Parking lots;
- Research labs; and
- Emergency shelters.
According to Los Angeles's city zoning map, the majority of areas zoned for industrial warehouse use are Central City, Los Angeles Port, LAX, and Van Nuys. The city has very specific requirements for the development of warehousing facilities, so make sure you're familiar with what you can and cannot do with the property.
For example, warehouses must have separate customer parking zones and driveways must be at least 45 feet wide. Warehouse owners may also have to pay the city government an annual service impact fee.
Los Angeles Earthquake Insurance
Los Angeles County is one of the most earthquake-prone regions in the country, with over 100 earthquakes recorded every day. If you're buying industrial real estate in Los Angeles, it's certainly in your best interest to purchase some kind of commercial earthquake insurance.
Many experts believe that Los Angeles is due for a large earthquake in the next decade, and you don't want to lose an uninsured property.
According to data from ValuePenguin, the average cost of earthquake insurance in California is about $3.54 for every $1,000 in coverage. Assuming your warehouse costs $1 million and you want to insure the entire value of the property, you can expect to pay at least $3,540 a year for earthquake coverage.
Given that Los Angeles has a higher earthquake likelihood than other California cities, premiums might be higher than the average.
How Much Does a Warehouse for Sale in Los Angeles Cost to Buy?
The average cost to purchase industrial real estate in Los Angeles is around $214.56 per square foot with an average property size of 28,657 square feet. The median price of warehouses for sale in Los Angeles is $309.34 per square foot with a median property size of 14,800 square feet.
The average cost to purchase flex industrial space in Los Angeles is $322.65 per square foot with an average property size of 16,733 per square foot. The median price of flex industrial space in Los Angeles is $369.52 per square foot with a median property size of 8,105.
How Much Does a Warehouse for Lease in Los Angeles Cost to Rent?
As of Q1 2023, the average cost to rent a warehouse for lease in Los Angeles is about $1.64 per square of space.
Market data shows that asking rates decreased from the previous quarter after making substantial gains over the latter half of 2021 and 2022. The submarket with the highest average asking rates for warehouse space is the Central District at $1.76 per square foot.
What's the Current State of the Los Angeles Warehouse Market?
As of Q1 2023, the Los Angeles industrial and warehouse market is contracting. The total amount of sublease space jumped nearly 53% over the past quarter, and leasing volume fell about 15% from Q4 2022 to 7.8 million square feet.
This decrease in demand is due to a combination of factors, including falling consumer demand from inflation and lingering effects of the pandemic on supply chains.
Additionally, high interest rates are starting to take their toll on sales and construction activity: Total sales volume dropped 41% over the past quarter and is now 15% lower than it was a year ago. Despite total sales volume falling, industrial prices continue to rise and have reached record heights.
Los Angeles currently has an additional 6.6 million square feet of industrial space under construction, most of which will be delivered to the South Bay and San Gabriel Valley submarkets, and Los Angeles has nearly 900 million total square feet of industrial space to choose from.
Is Buying a Warehouse in Los Angeles a Good Idea?
Whether you're buying for your business or want to invest in warehouse property, Los Angeles can be a good place to set up shop. Prices for warehouses for sale in Los Angeles are lower per square foot than many other California cities, such as San Francisco, and Los Angeles has a massive population with a high degree of consumer demand.
For warehouses specifically, Los Angeles is a major hub of transportation and trade. It has six commercial airports and is home to the single-largest seaport in the Western Hemisphere. The port moves over 9 million shipping containers every year, and businesses can buy or rent warehouse space to be right next to port operations.
Even though Los Angeles' industrial scene has slowed down this quarter, it is still well above pre-pandemic levels and demand remains high. The market seems to be normalizing as developers and buyers adjust to a high-interest-rate environment. The key is to find desirable warehouses in high-traffic areas that can service major transportation and residential zones.
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