Industrial job vacancies are on the rise in Los Angeles County.
The county’s industrial real estate vacancy rate rose to 3.8% this month, up from 2.3% last year and 1.7% in 2021. According to the Los Angeles Business Journal.
Potential reasons include declining port throughput, rising interest rates, rising rents, and the relocation of some companies to the Inland Empire and beyond. Experts and homeowners predict a slow this year and a small rebound next year.
Steve Bohannon of Cushman & Wakefield said the pace of sales and leasing was well below normal.
“Activity has slowed,” he told the business magazine. “The sales market and the investment sector have slowed down considerably.”
The slowdown at local ports has affected the industrial market. Throughput at the ports of Long Beach and Los Angeles fell 22%. When labor contract disputes closed the terminal this month, cargo was diverted to other ports.
The port’s slowdown and high prices for nearby properties have led some renters to consider locations outside of Los Angeles — some as far away as the Central Valley, Las Vegas or Phoenix.
Asking rents for industrial real estate in Los Angeles are $1.87 per square foot, up from $1.73 last year and $1.22 per square foot in 2021, according to Avison Young. In the Inland Empire, the rent is $1.25 per square foot.
Experts agree that some tenants choose the Inland Empire not for price discounts, but because of the larger warehouses here than in Los Angeles, while others stay in search of smaller buildings.
“In the infill area of Los Angeles, there aren’t many usable facilities above 500,000 square feet,” Rob Antrobius, who oversees Los Angeles and Orange counties at San Francisco-based Prologis, told Business Journal. “We’re seeing companies that need more than half a million square feet move to the Inland Empire because they have more options.
“We’re seeing some companies start looking at Phoenix, Las Vegas and Texas.”
Some companies have leased more space than they need during the pandemic and have sublet those properties.
Avison Young said there are 6.6 million square feet of industrial buildings available for sublease this year, a nearly 70% increase over last year’s total market and a nearly 64% increase over 2021.
Sublease listings compete for space leased directly by landlords.
Industrial sales fell sharply. As of June 1, 22 industrial properties had been sold in Los Angeles and 53 are expected to be sold this year. According to Avison Young, 139 industrial properties sold in Los Angeles last year and 145 in 2021.
Experts say the main culprits are rising interest rates, difficulties refinancing and the doubling of debt service by some businesses. Despite fewer sales, the average price per square foot this year is $411, up from $291 last year and $241 in 2021.
— Dana Bartholomew
