Ron Mgrublian

• Development pipeline down 57% year-over-year
• Vacancy rates up 48%
• Lease rates adjusted by 28%
• Tenant activity has resumed in the Inland Empire West industrial market
• Historic levels of positive net absorption in the submarket
• Multiple 1-million-square-foot lease transactions executed by credit tenants
• Nearly 5 million square feet of move-ins from big-box deliveries with prior year leases
• Inland Empire continues to attract institutional capital
• Class A 835,000 square foot building sold for nearly $200 million

• Leasing Activity: 2.3 million square feet (MSF) of industrial space leased this quarter, up by 1.03 MSF from the previous quarter.
• Vacant-Availability Rate: Dropped by 0.4% from last quarter to 4.2%, but still 2.8% higher than last year.
• Market Trends: Increase in vacant-available space due to tenants returning unused space since 2023.
• Asking Lease Rates: Declined to $1.71 (direct) and $1.68 (overall) per square foot (PSF), though still 40%+ higher over the last five years. Class A spaces aim for $2.00+ PSF.
• Tenant Behavior: Tenants are more selective and pushing for rental concessions, with landlords becoming more negotiable.
• Net Absorption: Positive for sublet space (525,417 square feet) but overall net absorption negative at -539,467 square feet.
• Sales Volume: $51 million across 9 transactions in the South Bay, with average building prices at $288.61 PSF and land values at $143.79 PSF.
• Capitalization Rates: Increasing due to higher capital costs, forcing sellers to adjust prices.
• Interest Rates: Around 6.5% for fixed, 25-year owner-occupier loans.
• Insurance Challenges: Rising premiums and providers exiting the California market.
• Property Values: Some industrial areas affected by homelessness and vagrancy, impacting property and rental values.

• In Q2 2024, San Gabriel Valley's industrial market showed resilience with a 5.9% vacancy rate.
• Rental rates now stand at $18.72 PSF, NNN annually.
• The construction sector is active, with 706,000 SF under development.
• The City of Industry represents 72% of SGV's industrial base and is a key player in new Class A warehouse and distribution space projects.
• Tenants and developers must stay vigilant and adapt to market fluctuations to capitalize on opportunities in the evolving SGV industrial landscape.

·  Tenant demand in Orange County slowed in the first half of the year. 

·  Vacancy rate increased from 1.9% at the end of 2022 to 4.4%. 

·  Leasing activity decreased. 

·  Rent growth has flattened after over a decade of steady double-digit annual growth. 

·  Negative net absorption of 799,275 SF in Q2 and negative 2.1 million SF in Q1. 

·  Total decline in the past six quarters exceeds 5 million SF. 

·  Long-term average vacancy rate since 2020 is 4.5%. 

·  Tenants face less competition for space. 

·  Landlords are offering more lease concessions. 

·  Largest sale in Q2: 278,572-SF Fullerton building sold for $338 per SF by American Realty Advisors to Rexford Industrial Realty.

• Building Sq Ft: 7,500 SF
• Commercial (Office/Retail) on the first floor and Residential on the second floor.
• Downtown Long Beach, CA, offers numerous benefits:
• Beach Access: Close to waterfront for beachand water activities.
• Entertainment and Culture: Home to venues like the Long Beach Convention Center and Aquarium of the Pacific.
• Dining and Nightlife: Diverse range of restaurants, bars, and cafes.
• Walkability and Transportation: Highly walkablewith good public transport connections.
• Economic Opportunities: Growing business district and proximity to the Port of Long Beach.
• Events and Festivals: Hosts numerous annual events and festivals.
• Parks and Green Spaces: Includes parks like Shoreline Aquatic Park.
• Historic and Modern Charm: Mix of historic buildings and modern developments.
• Diverse Community: Inclusive and welcoming community.
• Climate: Enjoys a Mediterranean climate, pleasant year-round.
• These factors make Downtown Long Beach avibrant and appealing place to live, work, and visit.

• Easing tenant demand has led to a significant increase in available industrial space in Orange County.
• Total available space has almost doubled, reaching 18 million square feet over the last 18 months.
• Both direct and sublet space have contributed to this increase, with sublet space nearly doubling to 3.3 million square feet.
• New construction has also played a role, adding 2.6 million square feet of space last year.
• As a result, the countywide vacancy rate has risen from a record low of 1.8% in Q4 2022 to 4.1% by the end of Q1.
• Negative net absorption was observed in three out of four major submarkets in the county during Q1.
• Rent growth has slowed to 2.5% year over year, offering some relief to Orange County tenants.
• The current triple-net county average rent is $1.66 per square foot, reflecting a 126% increase over the past decade.

Here are a few of the important points from the quarterly update on the greater Los Angeles industrial real estate market: 

1. Market Conditions:
   • Vacancies and availability increased across all submarkets.
   • Lease rates experienced a decrease.
   • Sales and leasing activity hit historic lows.
   • Construction starts diminished.
2. Employment and Wage Trends:
   • Unemployment rate fell to 3.8%, with a slight increase in labor force participation rate.
   • Average hourly earnings rose by 4.1% year-over-year, surpassing inflation.
3. Inflation Concerns:
   • Inflation measures remain elevated, with growing worries that the disinflation process has stalled.
   • CPI report indicates inflation surpassed forecasts, with both month-over-month and year-over-year increases.
4. Economic Growth:
   • Economy grew by 2.5% on an annual basis at the end of 2023.
   • Forecasted GDP growth for Q1 2024 is around 2.4%.
5. Investor Sentiment and Market Behavior:
   • Cautious investor sentiment due to uncertainty over potential federal interest rate cuts and geopolitical challenges.
   • Opportunities for owner-occupiers to acquire buildings with less competition from institutional investors.
   • Smaller buildings sought after via SBA loans and conventional financing, but with stringent oversight from lenders.
6. Tenant Trends and Industrial Real Estate:
   • Lease renewals becoming more prevalent among tenants.
   • Tenants increasingly subletting unused space.
   • Despite market corrections, industrial real estate remains sought after, driven by barriers-to-entry and demand for newer, functional space in infill Southern California markets.

The report ends with a note that the Port of Long Beach and Port of Los Angeles are seeing higher volumes.  With West Coast labor concerns resolved and issues at the Panama Canal (drought), Red Sea (safety), East Coast labor negotiations and now Baltimore (FSK Bridge Collapse) expect this trend to continue.

PROPERTY DETAILS

Available: ±14,122 SF Industrial Warehouseon ±31,561 SF of Land

Rate: $1.68 / SF Gross

Term: 1-3 years

Zoning: IG

APN#: 7121-011-025

• Two (2) Dock High and One (1) Ground Level Doors

• 17’ Minimum Clearance Height

• 800 Amps, 277/480 Volts, 3 Phase

• Large Fenced / Paved Yard

• 24 Parking Stalls

Available: ±39,600 SF of Land

Asking Rate: $0.35 /SF Gross ($13,860/Mo)

Zoning: B/R-MUTerm: One (1) Year

• Fenced yard

• Light Industrial uses

• Water and power available

• Prior Tenant Parked Trucks

• Close to 10 and 210 Freeways

AVAILABLE: ±43,560 SF to±142,879 SF Land

APN#: 8326-009-013, 014, 016, 017, 021

ZONING: M1 & Corridors Specific Plan

• Multiple Sizes Possible

• Partially Paved

• Water & Trash Available

• Close to 10, 71 and 60 Freeways

Available: ±182,746 SF / ±4.2 acres of Land

Price: $9.8M

Zoning: Commercial Automotive

APNs: 7315-012-002, & 7315-012-804

• Carson Auto Row

• Permitted Uses Include Sales, Service, Rental & Leasing of*:  Automobiles, Recreation Vehicles, Trucks, Motorcycles Permitted Uses Click Here

• Low Business License Fees & Utility Taxes

• Freeway Visibility: ±310,000 Average Daily Volume

_{*Provided special limitations}

During the fourth quarter of 2023, the San Gabriel Valley Industrial Submarket of Los Angeles experienced a continuation of the trend where available space increased once again, marking a significant factor in the local industrial real estate landscape. This rise in available space suggests potential shifts in market dynamics, such as increased supply or adjustments in tenant demand, influencing the overall vacancy rates in the submarket. 

The submarket faced a minor setback in terms of average rents, which decreased by $0.07 to $1.56 NNN (Triple Net Lease). This decrease may be attributed to the delicate balance between supply and demand, tenant negotiations, and broader economic factors that impact the pricing dynamics of industrial properties in the San Gabriel Valley. 

Within the Pomona Industrial Market, warehouse buildings in the fourth quarter of 2023 had an average sale price of $308.76 per square foot (PSF). This figure provides valuable insights into the local market's pricing dynamics, reflecting the perceived value of industrial properties in Pomona during that specific quarter. 

In the neighboring City of Industry, the average sale price per square foot for warehouse buildings stood higher at $351.68. This higher price point suggests that the City of Industry maintained a premium position within the San Gabriel Valley, potentially due to factors such as strategic location, specialized facilities, or a higher level of demand in that specific submarket. 

Looking at the San Gabriel Valley Industrial Market as a whole, the average sale price settled at $304.52 PSF during Q4 of 2023. This comprehensive figure encompasses the performance of various submarkets within the San Gabriel Valley, highlighting the overall pricing trend for industrial properties across the region. 

In summary, the fourth quarter of 2023 witnessed an increase in available space in the San Gabriel Valley Industrial Submarket, coupled with a slight decrease in average rents. The variations in average sale prices across specific markets, such as Pomona and the City of Industry, add complexity to the overall real estate landscape. Stakeholders and investors may find value in analyzing these trends to make informed decisions in response to the evolving dynamics of the San Gabriel Valley's industrial real estate market.