Los Angeles industrial real estate market report
Q3 2024
Expectations that a strike at East and Gulf ports would increase demand for short-term subleases have not materialized; instead, companies are expanding sublease space as they downsize their industrial footprints for efficiency and cost savings. Many businesses that had larger spaces during the pandemic are vacating early or not renewing leases, leading to a significant reduction in industrial space usage and a 23.9% decline in average rents, from $1.97/SF in 2023 to $1.50/SF in Q3 2024. In Q3 2024, Los Angeles completed 312,864 square feet of new industrial space, totaling 3.9 million square feet for the year. However, the newly enacted AB98 bill may complicate future developments with stricter regulations on environmental and community concerns, potentially limiting opportunities for smaller developers and driving up prices.
Inventory
There is currently 6.3 MSF of industrial product under construction. In total, there is 551.9 MSF of industrial product in the Los Angeles market.
Net absorption
Net absorption remained in the red with 1.3 MSF of negative net absorption was reported in Q3 2024.
Asking rent
Average asking lease rates continue to cool down in Q3 2024 to $1.50/SF. Average asking lease rates have dropped nearly 24% from Q2 2023.
Availabilities
Total available direct space increased to 40.9 MSF and sublet space increased to 9.5 MSF in the third quarter.
Vacancy
Total vacancy this quarter registered at 6.4% with 5.5% being direct and 0.9% being sublet.
Investment sales
Investment sales in the Los Angeles industrial market reported a sales volume of over $2.5B and an average sales price of $312/SF for the first three quarters of 2024.
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