Southern California
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First Quarter 2020 / Industrial Report Southern California In the Southern California Region The Industrial Sector disruption to the global supply chain will The Southern California tracked region includes four key markets: Los Angeles influence variations in the way businesses County, Orange County, San Diego County, and Inland Empire which consists of operate, but the need for space will both Riverside and San Bernardino counties. remain relatively consistent. E- commerce is expected to drive recovery Rental Rate by Market into the coming year, experiencing some $1.20 fluctuation along the way, but emerging $1.00 more robust with the implementation of technological advancements in $0.80 automation and robotics that have been $0.60 long under development. The current $0.40 slowdown in international trade, has led $0.20 to a significant reduction of cargo at the Los Angeles Orange County San Diego Ports of Los Angeles and Long Beach, and Inland Empire a preexisting trend of economic Vacancy by Market nationalism may hamper a return to 14.0% previous levels. Southern California 12.0% markets have already been adapting to 10.0% shifting requirements for last-mile distribution, brick-and-mortar retail 8.0% closures, and heightened e-commerce 6.0% expectations throughout the region; the 4.0% fundamentals built up over the last 2.0% decade place the local industrial sector in 0.0% a position to rebound. Inland Empire Los Angeles Orange County San Diego Partnership. Performance. avisonyoung.com Southern California First Quarter / Industrial Report Gross Domestic Product SD IE Southern California represents more than 48% OC of California's total real gross domestic LA product. Los Angeles ranks as the highest contributing county with $711 billion of California's $3.1 trillion gdp, as of YE2019. Construction San Pedro Ports Trade with LEED Certified Warehousing, manufacturing, and The slowdown in Mexico More than 63 million logistics needed to support e-commerce international trade, has led square feet of industrial Essential medical remains a strong driver for the economy. to a significant reduction of space is LEED Certified in cargo at the Ports of Los devices and PPE SoCal, with a tight 2.6% Speculative construction, in the Inland Angeles and Long Beach, production has vacancy rate. The five Empire as of the first quarter of 2020 sits and a preexisting trend of increased at factories in largest properties of at 75%, which is a rate that has economic nationalism may Mexico and cross-border which are located in historically been readily absorbed by the Moreno Valley and Perris, hamper a return to trade continues to be market. However, an expected tempering supported by officials. within Riverside County. previous levels. of leasing activity may apply resistance to the downward trajectory of vacancy rates. Leveling of vacancy rates is Active Construction expected by 2021. Southern California Industrial Square Footage 0 10M sf 20M sf 30M sf 40M sf Delivery Spotlight The largest industrial property to deliver in SoCal during Q1 was Building 1 of the Ontario Ranch Logistics Center in the Inland Empire. Totaling 1.2M sf, the manufacturing distribution center has been leased for immediate occupancy by Kimberly-Clark, producers of sanitation and health care paper products. 9.4M sf of inventory was added to the SoCal Inland Empire Los Angeles Orange County San Diego Industrial market in Q1, with 55% pre- committed to occupants. Partnership. Performance. avisonyoung.com Southern California First Quarter / Industrial Report Market Vacancy Net Construction Average Inventory Rate Absorption Pipeline Asking Rate 583,655,928 SF 4.6% 6,788,419 SF 19,680,524 SF $0.76 PSF Monthly Trends to Watch The surge in immediate warehouse employment is expected to level out in the longterm as companies develop new Supply Chain Development Local Businesses Companies are adapting to Speculative construction, Local government task forces technological efficiencies, however widely fluctuating inventory as of Q1 2020 sits at 75%, are proactively trail blazing employment will continue to be driven by demands, meanwhile air which is a rate that has the road back to economic healthcare, logistics, and service needs of freight shipments surge in historically been readily recovery with a series of the region to meet e- absorbed by the market. policies and resources to the rapidly growing population in the IE. commerce demands. help businesses. Sale Activity Inland Empire Industrial Sales More than 4.5M sf of industrial property 20,000,000 $2,500,000,000 changed hands during Q1, with a total sales 15,000,000 $2,000,000,000 volume of $600M in Inland Empire. The largest $1,500,000,000 sale of the quarter was the 1.6M sf distribution 10,000,000 $1,000,000,000 center at 5600 E Airport Dr in Ontario, sitting 5,000,000 $500,000,000 on 95 acres of land, which included a short- term leaseback by Kmart. The city of Ontario 0 $0 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 recorded the largest transactional demand in Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 the market, followed by the city of Riverside, Square Feet Sold Total Sales Volume and the city of Coachella a distant third. Partnership. Performance. avisonyoung.com Southern California First Quarter / Industrial Report Asking Rent Vacancy Rate Net Absorption $0.75 6.5% 7,000,000 $0.65 6.0% 5,000,000 $0.55 5.5% 3,000,000 $0.45 5.0% 1,000,000 $0.35 4.5% $0.25 4.0% ‐1,000,000 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 Inland Empire Vacancy Net Absorption Avg. Advertised Rates Current Q1 2020 Q4 2019 Q1 2020 Q1 2020 Q1 2020 Q4 2019 12 Month Total Qtr/Qtr Quarter Rental Rates Rental Rates Inventory (SF) Vacancy (SF) Vacancy (%) Vacancy (%) Absorption Change (%) Absorption NNN NNN Temecula / Murrieta / Lake Elsinore 12,369,773 414,090 3.3% 3.7% 93,980 -2,444 $0.68 $0.66 3.03% Perris / Menifee 27,744,604 2,976,647 10.7% 11.0% 658,715 2,774,210 $0.60 $0.75 -20.00% Hemet 1,573,675 5,505 0.3% 0.6% 3,500 27,713 $0.00 $0.00 0.00% South Riverside TOTAL 41,688,052 3,396,242 8.1% 8.4% 756,195 2,799,479 $0.67 $0.67 0.00% Corona 27,195,500 2,289,145 8.4% 7.5% -259,635 -103,294 $0.74 $0.75 -1.33% Riverside City 66,769,071 1,963,919 2.9% 1.9% -591,707 68,245 $0.68 $0.68 0.00% Moreno Valley 50,660,665 2,569,365 5.1% 6.1% 1,261,630 6,113,138 $0.61 $0.64 -4.69% Beaumont / Banning 7,261,041 1,082,310 14.9% 15.0% 10,430 1,524,306 $0.73 $0.73 0.00% North Riverside TOTAL 151,886,277 7,904,739 5.2% 4.9% 420,718 7,602,395 $0.72 $0.72 0.00% Indio / Coachella 3,913,653 78,841 2.0% 1.7% -11,722 59,855 $0.74 $0.74 0.00% Palm Desert / Palm Springs 4,525,783 120,106 2.7% 4.1% 65,684 459,266 $1.67 $1.68 -0.60% Coachella Valley TOTAL 8,439,436 198,947 2.4% 3.0% 53,962 519,121 $1.38 $1.41 -2.13% Chino 47,651,684 511,366 1.1% 0.7% 339,809 849,530 $1.14 $1.14 0.00% Ontario / Rancho Cucamonga 147,009,987 5,270,668 3.6% 2.8% 1,484,309 3,302,310 $0.78 $0.75 4.00% West San Bernardino TOTAL 194,661,671 5,782,034 3.0% 2.3% 1,824,118 2,785,742 $0.79 $0.77 2.60% San Bernardino City / Redlands 65,320,544 2,403,856 3.7% 5.3% 1,051,420 2,785,742 $0.81 $1.00 -19.00% Fontana / Rialto 105,506,020 6,361,068 6.0% 7.1% 2,630,268 5,503,200 $0.67 $0.67 0.00% East San Bernardino TOTAL 170,826,564 8,764,924 5.1% 6.4% 3,681,688 8,288,942 $0.73 $0.80 -8.75% Victorville/Hesperia/Adelanto 15,785,111 923,889 5.9% 6.2% 51,738 1,558,387 $1.09 $1.24 -12.10% Barstow 706,941 - 0.0% 0.0% - 109,971 $0.22 $0.22 0.00% North San Bernardino TOTAL 16,492,052 923,889 5.6% 5.9% 51,738 1,668,358 $1.06 $1.21 -12.40% INLAND EMPIRE TOTAL INDUSTRIAL 583,994,052 26,970,775 4.6% 4.7% 6,788,419 23,664,037 $0.76 $0.78 -2.56% Partnership. Performance. avisonyoung.com Southern California First Quarter / Industrial Report Market Vacancy Net Construction Average Inventory Rate Absorption Pipeline Asking Rate 447,292,542 SF 3.3% -2,298,987 SF 3,752,206 SF $1.11 PSF Monthly Trends to Watch Despite significant deliveries to market a robust construction pipeline is still in place to meet on-going Under Construction Spike in Demand Pre-leasing Close to 4 million square- Manufacturing, medical Leasing remains strong leasing demand. The industrial sector feet under construction manufacturing, storage, and with 1,598,859 SF of performed stronger than all other among buildings over distribution hubs recorded a space already pre-leased major sectors in Q1 2020.