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LOS ANGELES - LONG BEACHINDUSTRIAL MARKET REPORT
M A R K E T R E P O R T Q 1 2 0 16
L O S A N G E L E S - L O N G B E A C HI N D U S T R I A L M A R K E T R E P O R T
Q1
2LOS ANGELES - LONG BE ACH INDUSTR IAL MARKET REPORT Q1 2016
WEST MIDWEST
SOUTH
SOUTHWEST
EAST
CANADA
AustriaBelgiumFranceIrelandLuxembourg
NetherlandsPolandSlovakiaSpainTurkey
AFFILIATE INTERNATIONAL RELATIONSHIP
Absorption 165,476 SF
Vacancy 0.9%
Average Rent$0.76 / SF
Under Construction1,867,256 SF
Sales Transactions $82.62 Million
Average Sales Price PSF$152.50 / SF
Q1 TRENDS AT A GLANCE
ABOUT LEE & ASSOCIATES
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NO PLACE TO GO
Source: CoStar Property® & AIR Commercial Real Estate Associat ion
3LOS ANGELES - LONG BE ACH INDUSTR IAL MARKET REPORT Q1 2016
Across the country the economy is continuing to march
forward. Taking up the l ion’s share of economic growth is
the Golden State of Cal ifornia. Accounting for almost 20%
of the Nation’s incoming foreign investments and home to
some of the wor ld’s largest corporations. With 4 out of the
top 10 investment market places in the U.S., Cal ifornia is
THE prefer red destination for foreign investors looking for
a long term and stable place to park their money. In 2015
the state surpassed Brazi l as the 7th largest economy in the
wor ld with a GDP of 2.42 tr i l l ion dol lars. Taking these factors
in to consideration, Cal ifornia is expected to outper form
the rest of the nation in overal l economic growth this year.
More than 650,000 jobs are anticipated to be coming to
the state in 2016 in construction, professional and technical
services, and warehousing and transportation as related
to foreign trade. With more jobs comes more growth, and
with growth, companies are f inding their existing faci l it ies
inadequate in keeping up with the demands of their
increased business.
Warehouse and Flex vacancy, at the end of the f i rst
Quarter, continued to fal l, the combined estimate is
1.1% in LA County. The South Bay submarket is lower at
approximately 0.9% combined and even lower at 0.8% for
South Bay Warehouse only. True to the nature of supply
and demand the pr ice per square foot in the South Bay
Submarket has r isen near ly 16% from last year’s $0.66 PSF
to the $0.76 PSF we are seeing today. Due to these factors,
tenants have to plan fur ther ahead when searching out
qual ity space in which to relocate or expand their existing
businesses. In many instances companies are opting not
to expand, and instead renew at the higher rental rates
in order to maintain their most prof itable l ines of business
whi le they adjust to this “new economy”. On the f l ipside,
landlords have al l the leverage and are being more picky
about with whom they decide to enter into an agreement.
Having so many tenants at the negotiating table, we
are f inding they are able to demand higher rates,
better credit, and longer terms al l whi le giving up fewer
concessions. For better or for worse, it has been made
abundantly clear over the last quarter that vacancy has
been and wi l l continue to be the main issue facing the Los
Angeles Industr ial Real Estate Market. Great for Landlords
and troublesome for tenants, we are seeing that the lack
of space has created a surplus of shoppers left to f ight for
what l itt le inventory remains left on the shelves.
Continuing the trend, land pr ices have seen a substantial
increase as wel l. With over 40% of the nation’s goods
coming through our ports, we are currently witnessing a
complete lack of viable land sites left in the South Bay
approved for trucking and transportation related uses. This
has presented itself to be problematic when determining
a value for such product. However, with the recent lease
of 21.5 acres at 1500 Lomita, a new precedent for qual ity
trucking and transportation faci l it ies has been set at
almost $30,000,000 in total consideration, companies can
now expect to see a rate between $0.25-$0.30 PSF gross
for s izeable (10+Acres) land leases. Moving forward, it is
doubtful companies wi l l be able to continue the practice
of tying up large swaths of land with long term leases at
low pr ices.
The lack of sites has not only greatly affected Los Angeles
and Long Beach Ports, but LAX is feel ing the pinch as wel l.
The extremely tight market is making places l ike Hawthorne
and Inglewood seem more attractive to companies looking
to be next to one of the wor ld’s busiest ai rports. As a result
Amazon has recently acquired 215,000 SF in Hawthorne for
their additional warehousing and distr ibution operations.
Not only has leasing witnessed a signif icant increase, but
over-al l sales have seen considerate r ise in their pr ice.
With l imited inventory being made avai lable for sale
in the South Bay Industr ial Market, we are seeing both
investors and users al ike rushing to grab what viable sites
they can. Properties that were previously ignored due
4LOS ANGELES - LONG BE ACH INDUSTR IAL MARKET REPORT Q1 2016
$0.56
$0.58
$0.60
$0.62
$0.64
$0.66
$0.68
$0.70
$0.72
$0.74
$0.76
AVERAGE ASKING RENT BY QUARTER
3Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
-1m
0
-500k
500k
1m
1.5m
2m
NET ABSORPTION
4Q13
3Q15
1Q16
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
VACANCY
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
3Q13
4Q13
1Q14
6.0%
1Q14
4Q15
3Q14
4Q14
1Q15
2Q15
2Q14
3Q13
$6006 08 10 12 14 16
$80
$100
$120
$140
$160
ASKING PRICE PER SQ FT
4Q13
functional obsolescence, contamination, or zoning issues
are now being reconsidered. As a result the average
rates have gone from just over $120 PSF at this t ime last
year to asking almost $160 PSF for industr ial space today.
There is cur rently just over 1,200,000 SF in the development
pipel ine, which isn’t much when taking into consideration
the existing demand. It is most l ikely that the major ity of
this new space wi l l be del ivered with leases al ready in
place with high credit tenants.
Looking forward, buyers and tenants wi l l have to
plan fur ther ahead, and be ready to jump on the r ight
opportunity as it comes along. Vacancies are expected
to stay below the 1% mark this year, and wi l l continue to
plague buyers and tenants. As for owners, the deck is
stacked in your favor. There is no longer a point in doing
off market transactions when the market is so transparent,
and properties are often receiving multiple offers. Having
such high demand and l itt le product, owners can expect
to maximize their prof its by going to market.
Written by Dustin W. Byington
Source: CoStar Property®
5LOS ANGELES - LONG BE ACH INDUSTR IAL MARKET REPORT Q1 2016
Q1 2016 INDUSTRIAL STATISTICS
Q1 2016 TOP LEASESPROPERTY ADDRESS CITY TYPE TENANT SQUARE FEET LEASE TYPE
1500 E. Lomita Blvd. Wilmington Land California Multimodal / Cal-Cartage 931,748 SF Direct
2230 E. Carson St. Long Beach Warehouse Idea Nuova Inc. 198,292 SF Direct
21950 Arnold Cener Rd Carson Warehouse DG Logistics 185,629 SF Direct
18221 S. Susana Rd., Ste. A & B Rancho Dominguez Warehouse Western Intermodal Transport 100,427 SF Direct
1200 W. Walnut St. Compton Warehouse Ablecargo 43,000 SF Direct
Q1 2016 TOP SALES
PROPERTY ADDRESS CITY REGION TYPE SQUARE FEET SALES PRICE
705 E. D St. Wilmington South Warehouse 50,000 SF $217.00 PSF
19500 - 19506 Normandie Ave. Torrance South Warehouse 20,000 SF $165.00 PSF
690 W. Manville St. Compton South Warehouse 55,048 SF $136.34 PSF
1650 W. Rosecrans Ave. Gardena South Multi-Tenant Warehouse 32,256 SF $135.11 PSF
19603 Figueroa St. Carson South Warehouse 15,120 SF $125.66 PSF
Source: CoStar Property®
1500 E LOMITA BLVD, WILMINGTON LEASED
705 E. D ST, WILMINGTON SOLD 690 W. MANVILLE ST, COMPTON SOLD19500-19506 NORMANDIE AVE, TORRANCE SOLD
2230 E. CARSON ST, LONG BEACH LEASED 21950 ARNOLD CENTER RD, CARSON LEASED
6LOS ANGELES - LONG BE ACH INDUSTR IAL MARKET REPORT Q1 2016
At the start of 2016, the Southern California Ports had confidence, productivity and demand blowing at their backs producing combined increase in containers over 9%. To quote Executive Director Gene Seroka, “The Feedback we are receiving from cargo owners and exporters is that the Port is delivering on speed, efficiency, cost and service. Our terminal operators and supply chain partners are working with us to continuously improve and optimize operations.”
The Port of Los Angeles had their biggest January and February in a 109 year history, leading to a record first quarter showing containers increasing by 11.3% with 2,030,982 TEUs. January was up over 33% (704,398 TEUs) and February was even better at almost a 42% increase (713,721 TEUs). Total March volumes decreased by 22.6% (612,863 TEUs) when compared to last year. This significant drop in container volume is attributed to last year’s surge after congestion issues were resolved.
The Port of Long Beach 1st quarter experienced a 6.1% increase and had their best start since their peak in 2007, as well as their strongest February. January 2015 surged 24.84 %, over (536,188 TEUs) and then posted an even stronger gain of 35.90% (561,412 TEUs) in February. The same March drop was experience by Long Beach, for the same reason as LA; and fell 26.2 % (464,855 TEUs). Long Beach’s CEO Jon Slangerup stated “Our value proposition, being the fastest and most cost-effective supply route from Asia to America’s consumer markets, continues to define Long Beach and Southern California as the multimodal gateway of choice for our
shipping customers.”
Looking forward to the 2nd quarter, cost to deliver containers to the West Coast are still extremely competitive and viewed as low by industry standards. A 40 foot container costs are approximately $700-$800 and arrives in 12 days. Whereas the same container is over $1,600 going to NY-NJ and takes over twice as long with 25 days transit. Additionally, the two largest container vessels currently calling North America, the CMA CGM Benjamin Franklin and the Maersk Edmonton, are scheduled to return concurrently in late April; re-enforcing the mega-ship dominance of the Sothern California Ports.
While these volumes set the stage to what could be the Ports biggest year, there has been a setback to future capacity growth. In late March, A California Superior Court judge found the environmental impact report on the BNSF Railway’s near-dock intermodal rail yard to be inadequate, further delaying a project that has been more than 10 years in the making. Furthermore, more competition for the mega-ships later this year as the Panama Canal is 97% completed and is finally scheduled to open later this year after 8 years of construction. After the Canal opens, competing Gulf and East Coast Ports will be able to service larger ships that Southern California deep water ports have had an advantage on. These other Ports have plans to increase their market share, however, they would have to beat LA / Long Beach’s current value-add proposition for imported goods. This is something to monitor in the future.
Total Containers San Pedro Port Complex
600,000
0 2,800,000
3,000,000
3,200,000
3,400,000
3,600,000
1,000,000
1,400,000
1,800,000
CombinedLoaded Outbound
CombinedLoaded Inbound
LOS ANGELES & LONG BEACH PORT ACTIVITY Written by David Bales, Principal
YTD MARCH 2016 Source: www.polb.com www.portoflosangeles.org
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
TEUs TEUs
7LOS ANGELES - LONG BE ACH INDUSTR IAL MARKET REPORT Q1 2016
*Third-Party Data Sources: CoStar Group, Inc., AIR Commercial Real Estate Association, UCLA Anderson Forecast, Port of Long Beach, Port of Los Angeles, and The Journal of Commerce.
Build-to-Suit• For Lease• For Sale• Facility Specification• Bidding & Design Build
Construction• Expansion Planning
Fair Market Value Analysis• Valuation of Land• Valuation of Buildings
and Other Improvements
Financial Analysis of Alternatives
• Comparing Alternative • Proposals• Purchase vs. Lease
Analysis• Existing Building Search
Site Search• Site Selection Criteria• Development & Analysis
Sale-Leaseback• Institutional Investors• Private Investors
Disposition of Existing Buildings• Locally & Nationally• REO & Distressed-Asset
Valuation & Sales
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LOS ANGELES & LONG BEACH INDUSTRIAL MARKET MAP
LOOK TO LEE & ASSOCIATES FOR SOLUTIONSThe information and details contained herein have been obtained from third-party sources believed to be reliable; however, Lee & Associates Los Angeles-Long Beach, Inc. has not independently verified its accuracy. Lee & Associates Los Angeles - Long Beach, Inc. makes no representations, guarantees, or express or implied warranties of any kind regarding the accuracy or completeness of the information and details provided herein, including but not limited to the implied warranty of suitability and fitness for a particular purpose.*
© Copyright 2015 Lee & Associates Los Angeles - Long Beach,Inc. All rights reserved.
Contributed By:Dustin Byington | Craig Poropat
David Bales
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Office: 310.768.8800 | Fax: 310.768.8978
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