Q1 2024 Industrial Market Outlook – Los Angeles
MARKET OVERVIEW
In Q1 2024, the rise in vacancy of industrial space in LA County continued, contributing to a 180-bps increase in the vacancy rate year over year, now standing at 4.8%—20 basis points higher than Q1 2009. Over the past two years, LA County has added approximately 10.2 million square feet of completed construction to the market, while absorption has resulted in a negative 21.9 million square feet during the same timeframe, indicating a shift in the industrial market’s trajectory.
TRENDS TO WATCH
Lower leasing velocity remains a concern for landlords while providing ammunition for tenants to negotiate favorable deals. Nevertheless, an increase in the number of options for e-commerce warehousing of goods will drive the market as companies seek out flexible solutions to meet evolving demand. Companies that actively reduced excess warehouse space has resulted in a significant increase in the amount of available sublease space on the market, up by 24.9% from the end of 2023 and 77% higher than Q1 2023, totaling approximately 11.4 million square feet which is an all-time high. This abundance of industrial indicates that companies with warehousing requirements will have a variety of options as cargo coming through the ports remains up in pace. According to the latest figures from the Ports of Los Angeles and Long Beach, inbound TEU cargo volumes combined—a significant driver of warehouse space demand in SoCal—increased by 32% year-to-date as of February 2024.
