INLAND EMPIRE – A new CompStak report, published October 18, looks at recent data on the state of the Southern California industrial market and whether there is any evidence of a slowdown in 2023.
For the Inland Empire region they found that industrial rent is still growing slightly faster among the three SoCal markets – up 6.1% from 2022.
Increase in port volumes
The Port of Los Angeles handled 823,016 20-foot equivalent units – TEUs in August. This figure is reportedly an increase of 3% from last year and 21% above July.
The report says the news comes after the conclusion of labor negotiations in June that resulted in a new contract that was ratified at the end of August.
Warehouse rents are slowing
For the past two years, increases in rent have gone up due to inflation.
CompStak says industrial rent growth has slowed in 2023 as compared to 2022 across the Inland Empire, Los Angeles, and Orange County markets.
The Inland Empire remains highest among the three markets and slightly above pre-pandemic levels – up 6.1% from 2022, while Los Angeles County is up just 0.1% since last year.
According to the report, now that inflation is not increasing as rapidly, the yearly rent increases are starting to slow down.
Smaller properties being leased
At the end of 2022, the size of properties being bought or leased in the Inland Empire had a sudden increase – property sizes spiked to over 244,000 square feet.
But by the beginning of 2023, things had returned to normal, and the properties were smaller, around 104,000 square feet.
In addition, the Inland Empire had average starting rents for spaces over 100,000 square feet surpass those smaller than 100,000 square feet. The report says this trend has continued for two consecutive quarters.
Future challenges
The report says potential moratoriums on new industrial spaces may cause restrictions on the supply of products.
A coalition of environmental, labor, community, and academic groups have pushed for construction moratoriums citing health concerns.
The report says a few local municipalities have taken measures to restrict new industrial construction in their jurisdictions, while some moratoriums are set to expire by the end of this year. Others have been extended with plans to rezone for other uses.
Interest rates are at a 22-year high and may go higher as a result of two upcoming Federal Reserve Board meetings. The reports says this continues to dampen new construction starts in all sectors.
CompStak also says another trend to watch is lease expirations and whether landlords will be able to recapture or renew tenants at higher rates.
To read the full report click here.
