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The Greater Los Angeles (GLA) industrial market experienced notable developments in Q2 2024, with vacancy rates stabilizing at a low 2.3%. This tight market continues to reflect strong demand, though new deliveries and ongoing construction projects are gradually easing supply constraints.
Net absorption for the quarter was robust, totaling 4.2 million square feet (SF). This indicates healthy leasing activity despite economic uncertainties, as businesses continue to prioritize strategic locations like Greater Los Angeles for their industrial operations.
New supply is gradually coming online, with 3.5 million SF delivered this quarter and an additional 12.1 million SF under construction. This influx of new space is essential to meet the ongoing demand and should help to moderate rental growth in the coming quarters. Currently, the average asking lease rate has risen to $1.45 per SF per month, reflecting both high demand and limited availability.
Submarket Insights
San Gabriel Valley remains a standout submarket with a vacancy rate of just 1.8%. Net absorption here reached 1.1 million SF, underscoring the region’s attractiveness for industrial tenants. New deliveries were significant, adding 1.2 million SF, with another 3.4 million SF under construction. The average lease rate in this submarket stands at $1.50 per SF per month, reflecting its premium status.
South Bay also performed well, maintaining a low vacancy rate of 2.0% and recording net absorption of 1.5 million SF. This submarket remains a hub for logistics and distribution due to its proximity to the ports of Los Angeles and Long Beach. New supply included 900,000 SF delivered this quarter, with 4.2 million SF under construction. Lease rates in South Bay average $1.47 per SF per month.
Inland Empire West, a critical industrial hub, showed a slight increase in vacancy to 2.5%, with net absorption of 1.6 million SF. This area saw significant new deliveries totaling 1.4 million SF, and 4.5 million SF is currently under construction. Lease rates here are slightly lower, averaging $1.40 per SF per month, reflecting its vast inventory and competitive market.
Market Trends and Future Outlook
The GLA industrial market remains a top choice for investors due to its strategic location and robust market fundamentals. However, the ongoing delivery of new space and significant projects under construction may gradually ease the tight market conditions. Investors should monitor these developments closely, as they could influence future rental rate trajectories and vacancy levels.
Sustainability and Resilience
As the industrial sector evolves, incorporating sustainable practices and resilience strategies is becoming increasingly crucial. Developers are adopting green building practices to meet tenant demands and regulatory requirements. Flexibility in leasing terms is also essential to accommodate shifting tenant needs in an uncertain economic climate.
The Greater Los Angeles industrial market is poised for continued growth, but stakeholders must remain vigilant. Adopting sustainable and adaptable strategies will be key to navigating future challenges and capitalizing on emerging opportunities.
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