Industrial Activity Picks Up, But Rates Dip

LOS ANGELES, CA-Sales and leasing of industrial space in Los Angeles County increased for the third consecutive quarter, but average asking rental rates dipped for the first time in a year, according to a third-quarter report by CB Richard Ellis.

Compared to second quarter, total sales and leasing activity in the county increased 10% to 13.3 million sf from 12.1 million sf during the second quarter. This year’s third-quarter total represented a 59% year-over-year increase from 8.4 million sf transacted during third quarter 2001. For the first nine months of 2002, industrial activity totaled 35.2 million sf, a 40% increase over the same period last year, the CB report says.

Such brisk activity is unusual for the third quarter, according to Lewis Horne, senior managing director of the Los Angeles Region for CB Richard Ellis, who notes that the third quarter is traditionally slow. Horne says the industrial market’s performance thus far this year suggests that 2001 was the low point for the industrial market.

Average asking lease rates decreased to 48 cents per sf per month, triple net, compared with 51 cents in the third quarter last year. The dip marked the first time average asking rental rates have changed since the third quarter of last year.

Vacancy rates decreased to 3.0%, the lowest level in the last two years. The third quarter vacancy rate stood at 3.7% in Los Angeles County, up from 3.4% in the second quarter, while availability was 6.9%, down from 7.1% in the second quarter but unchanged from the third quarter last year. Net absorption increased to 5 million sf from less than a million last quarter.

The CB report says the amount of industrial space under construction has steadily diminished over the past five quarters and stood at 6.2 million sf at the end of the third quarter, 14% less than the 7.2 million sf last quarter and half the 11.9 million sf under construction a year ago. This reduction of new supply entering the market, combined with the increase in demand, accounted for the reduction available space.