Class A product is going off the market fast in Northern California’s industrial basin. Older product is sitting on the market longer, while mid-sized spaces are still the East Bay’s bread and butter. Net absorption has been pegged on a negative trend due to new construction and the volume of deals slowing down. Certain products are giving concessions to compete with newer product, while some landlords are trying to push the market limits to see how heavy tenant’s pockets really are. Several significant leases were signed in the East Bay during the second quarter of 2019. The largest deal of the quarter belonged to Service West, a furniture installer that signed a renewal and expansion totaling 252,021 square feet in San Leandro at 2350 Williams Street. Javelin Logistics, a logistics and distribution provider, also inked a new lease for 134,279 square feet at 7091 Central Ave. in Newark. Confluent Medical had the largest research and development deal of the second quarter, totaling 65,385 square feet. The material science tech company renewed at 47513 Westinghouse Drive in Fremont. The most significant investment sale of the second quarter occurred at 44100 and 44200 Osgood Road in Fremont. This is where Western Digital …
The Los Angeles office market ended the first quarter with the average asking rent steady over the prior quarter. However, at $3.20 per square foot, the average asking rent remains the highest level on record, up 4.2 percent over the first quarter of 2018 and 15 percent above the prior peak reached in 2008. While the vacancy rate this quarter increased 30 basis points over the prior quarter, it is down 10 basis points from Q1 2018 at 10.6 percent. This is about where it was pre-recession in 2004. This rise in vacancy was the result of several large move-outs, including about 200,000 square feet in the South Bay and 50,000 square feet in the Central office markets. Leasing volume fell to 5.8 million square feet, down 19.6 percent from the prior quarter and 7.9 percent from Q1 2018. The rate of job growth is having some impact on the office market. Los Angeles County remains near full employment with the unemployment rate at 4.6 percent, one of the lowest rates on record. The Los Angeles County Economic Development Corporation (LAEDC) notes the county added 59,000 jobs in 2018. The latest LAEDC jobs forecast points to a strong and steady …
One fact is very clear as we assess the retail landscape and take note of the variety of retail activities taking place: food and beverage (F&B) and dining out continue to reshape consumer trends. These trends are heavily influencing retail activities throughout the region, especially in the Downtown Los Angeles submarket. The market continues to show great activity in F&B as landlords look to absorb vacancies with more food uses by creating unique dining experiences and take-out options for today’s consumer. This new demand has been the catalyst for the increase in commissary kitchens and restaurateurs leasing spaces for delivery models that cater to the growing, app-based delivery services. CBRE’s latest report, the Food in Demand Series, highlights the momentum of F&B. This extends to fast-casual dining, prepared dining options offered in grocery stores, and as stand-alone offerings in mixed-use settings, such as residential, creative office and hospitality projects. Per the report, consumer spending in restaurants amongst Millennials, Generation X and Baby Boomers has outpaced spending on grocery items. This is a significant shift for consumers. For this reason, we will likely see landlords maintain a focus on F&B as a means to bring value to their assets and create …
The Los Angeles County industrial market continues to see record low vacancy rates, which are hovering in the 1 percent range with a conservative forecast calling for rents to increase by 7.5 percent in 2019. Ecommerce companies and third-party logistics providers (3PLs) — many of which support ecommerce operations — will continue to be dominant market players, according to NKF’s Los Angeles industrial market report for Q1 2019. In North Los Angeles, we are seeing multiple submarkets, including those in the San Fernando Valley, Ventura County, Conejo Valley, Kern County, and the Santa Clarita areas, becoming more connected than ever before. These areas and projects are now “connecting the dots” between all the submarkets as the opportunities for industrial space in Los Angeles’ core markets become increasingly more competitive and scarce. For example, occupiers that have been in the 130 million-square-foot San Fernando Valley industrial market for decades are now needing more space. However, the opportunities for larger, modern product are just not there. The majority of industrial product is less than 100,000 square feet with 16- to 24-foot clear heights. This can work for users like cosmetics, entertainment and aerospace, but others need more modern features to streamline operations. …
The City of Los Angeles checks all the boxes for an excellent apartment owner environment. This includes a booming economy, expensive housing, meaningful job growth, and an abundance of Millennials and professionals. Los Angeles enjoys an immense and fast-growing high-tech industry, especially within the media, tech, aerospace and advanced transportation industry with the likes of Netflix, Google, SpaceX and Northrop Grumman. Los Angeles County houses the nation’s largest international trade industry, the nation’s largest manufacturing base, and an increasing amount of venture capital investment startups. A growing economy is almost always paired with escalating housing costs, and Los Angeles is no exception. More than ever, residents are driven to rental housing as homeownership is prohibitively expensive and not conducive to job mobility and flexibility. Last year was a banner year for region’s apartment sector. The average market rent in the Los Angeles MSA has seen extremely impressive growth, increasing an average of 5.3 percent annually since the turn of the century, according to Axiometrics. This remarkable trajectory has been spurred by the extremely tight rental market, with annual occupancies averaging between 94 percent and 97 percent. Such indicators allow landlords to be extremely discerning when vetting tenants, which, in turn, …
From its near-perfect weather, parks and beaches to its commerce-friendly environment and well-educated workforce, Orange County has plenty of attractions to offer residents, businesses and multifamily investors. Add to that list well-paying jobs in the expanding professional and business services, and tech and healthcare sectors, and you can see why demand for housing in the county is on the rise. Job growth has pushed the unemployment rate to below 3 percent, a level not seen since the fourth quarter of 1999. The strengthening economy has created a tremendous tailwind for apartment demand in a metro where the cost of a single-family home is out of reach for most households. As a result, Orange County’s multifamily vacancy rate stood at the extremely low level of 3.8 percent at the end of the third quarter. The low level of apartment vacancy has also been positively affected by a change in the rate of new construction. After several years of increased supply, the amount of new housing in the pipeline has begun to decrease, having reached the apex of the current cycle in 2017. This year and next, the county will receive about 4,000 new apartments, down from the more than 4,800 units …
The Orange County retail real estate market remains resilient despite continued pressure from growing ecommerce sales and a new tranche of retailer bankruptcies. Sears is the latest retailer to file for bankruptcy in the Amazon era. Toys“R”Us, Fallas Paredes and Mattress Firm have all declared bankruptcy, while Lowe’s announced it would close all Orchard Supply Hardware stores. In comparison, ecommerce sales continue to experience double-digit increases year-over-year and analysts are quick to conclude the so-called “retail apocalypse” is imminent. Does this mean it’s time to panic if you are in the retail real estate business? Definitely not, but it does mean the edge belongs to those who are proactive and adaptable in their decision making. We are also seeing many retailers and developers step up their game in the wake of ecommerce popularity. Retailers like Walmart and Ralph’s/Kroger are offering free same-day delivery and, in the case of groceries, food delivery in as little as one hour. Retailers like Best Buy are not only price matching but offering better product education and experience via what the company calls a “stickier” relationship. Developers are getting better at placemaking, the multi-faceted approach to planning, design and management of space, giving people more …
The Orange County office market continues to remain healthy with an unemployment rate of 2.6 percent in the second quarter of 2018. This is down from 3.2 percent 12 months prior. The driving industry sectors for Orange County that occupy a large portion of office space include financial services, information technology, logistics and healthcare. We are currently seeing vacancy rates around 11.7 percent, which is about a 10 basis point increase from the second quarter of this year. The main reason for this increase has been momentum in completed construction projects with more than 2.2 million square feet that has been delivered over the past 12 months. At the mid-year point of 2018, more than 808,000 square feet of office space was under construction — the majority of which was speculative. The largest office projects under construction right now include Flight at Tustin Legacy in Tustin and the Quad at Discovery Business Center in Irvine Spectrum. There are four Class A, institutional-quality office projects currently under construction in the county that total nearly 1.3 million square feet — 75 percent of which is pre-leased to tenants. All this bodes well for the continued confidence in the Orange County market. We …
The industrial market in Orange County remains strong as demand continues to far outweigh supply. Vacancy throughout the region remains at historic lows, staying below 3 percent for the 13th consecutive quarter through the third quarter of this year. The largest submarket, North Orange County, is also the tightest submarket with a 1.2 percent overall vacancy. As an infill market, we do not anticipate significant increases in vacancy within the Orange County industrial marketplace for the foreseeable future, despite the new developments recently delivered, planned or under construction. There are several significant industrial development projects in various stages in the county. This is welcome news by users seeking to upgrade and expand into modern facilities while maintaining local operations. The first is a 30-acre redevelopment site in Huntington Beach that was purchased by Sares Regis Group earlier this year. Sares Regis is expected to begin construction shortly, with plans to deliver more than 600,000 square feet of new product in late 2019. Shea Properties recently began construction on Shea Business Center in Santa Ana, which is planned for nearly 530,000 square feet and a completion date in 2019. Western Realco is also nearing completion of Beckman Business Center, a 900,000-square-foot, …
The Inland Empire continues to be one of the most dynamic industrial real estate markets in the country from both a user and investor perspective. Rent growth remains exceptionally strong, boasting a growth rate of more than 50 percent in the past five years, with a 10.1 percent increase in 2017. Although current average asking rents are at record highs, they remain at a 40 percent discount when compared to the neighboring infill markets of Los Angeles and Orange County, indicating ample room for further growth. Vacancy remains unchanged at 3.7 percent, despite 20 million square feet of deliveries last year, a testament to the market’s unrivaled user demand. Leasing momentum continues to outpace supply, particularly for recently constructed distribution space. This is demonstrated by the 46 percent pre-lease rate for deliveries greater than 1 million square feet last year. The Inland Empire’s proximity to world-class transportation infrastructure, combined with a relatively large supply of recently delivered distribution facilities, creates a highly optimistic future outlook when considering the projected exponential growth of e-commerce. The Inland Empire’s e-commerce primacy of location as it relates to underlying market fundamentals are attracting best-in-class domestic and global capital. This is creating a hyper-competitive buyer …