Market Reports

— By Edward F. Del Beccaro, Executive Vice President, TRI Commercial — The major Northern California industrial markets contain a total of more than 860 million square feet of industrial buildings. The San Francisco Bay Area, North Bay, Silicon Valley, Sacramento and Central Valley have all experienced a falloff in tenant demand from 2021 to 2022 pandemic highs. Most markets experienced negative absorption in fourth-quarter 2023, including sublease space coming on the market that resulted in rents either plateauing or decreasing.  Nevertheless, the outlook is still positive based on the various economic drivers pushing the market. For instance, manufacturers are benefitting from onshoring, with a projected 40 percent reduction in sourced material from China, per a recent report from Alix Partners. In addition, declining interest rates and continuing inflation will cause institutional money to flow into the industrial sector versus the office sector, according to a March 2024 ProLogis report. Below are various industrial submarket reviews: In the Oakland/East Bay Industrial I-80/880 Corridor, year-end 2023 experienced a slowdown in demand due to new construction and existing space becoming available. More than 10.2 million square feet is available, reflecting negative absorption of more than 778,000 square feet last year. The Port …

— By Robert Peddicord, Executive Managing Director, CBRE South Bay — The Greater Los Angeles (GLA) industrial market is showing stability while enduring challenges like higher vacancy rates, negative absorption and an anticipated decrease in lease rates. Markets across the country continue to adjust post-pandemic, and GLA is no exception. Nevertheless, the GLA industrial market is poised for long-term resilience, thanks, in part, to its proximity to the ports of Los Angeles and Long Beach, while LA’s large population base drives the need for warehousing.  San Pedro Bay Ports The GLA industrial market continues to rely on the San Pedro Bay ports, the two largest ports by volume in the U.S. Although there has been an average decrease of 1.9 percent in cargo volume over the past five years, the San Pedro Bay terminal operators and dockworkers moved 16.6 million TEUs (twenty-foot equivalent units) in 2023, outpacing the TEUs moved at other ports.  Disruptions from the Suez and Panama canals may divert more U.S.-bound cargo ships from Asia to West Coast ports. The West Coast benefits from lower shipping container costs, with about a 40 percent discount shipping to the West Coast compared to the East Coast. U.S. importers, shippers …

— By Zach Middleton, senior associate, The Klabin Company/ CORFAC International — Last year brought significant change to the industrial sector across the country. Orange County was not immune to general market factors that were influenced by a sharp rise in interest rates, growing vacancy rates, shallowing tenant demand and increased supply. Fortunately, Orange County remains resilient heading into 2024 due to its prominent geography harbored by major distribution routes along the 5 and 91 freeways, as well as the county’s proximity to the ports.   Orange County also proudly showcases one of Southern California’s most diverse tenant pools. This is spearheaded by key sectors like technology and innovation, research, healthcare and biotechnology, manufacturing and aerospace, consumer goods, ecommerce, wholesale and distribution, underscoring its economic versatility and potential for sustained growth.  Market breakdown: vacancy rate uptick still below historical average Current vacancy rates across Orange County are as follows: • North County – 2.4% • West County – 4% • South County – 3.5% • Airport – 2.5% Vacancy rates have trended upward but remain below the historical average of 4 percent.  A growing number of cheaper sublease options and the slight uptick in vacancy rates have influenced direct deal …