Q2 2022 Industrial Market Outlook – Los Angeles


Los Angeles County’s industrial market got a bit of breathing room from the relentless demand for warehouse distribution space as the amount of completed construction (1,849,286 square feet) was basically matched by 1,811,802 square feet of vacant space added to the market in the second quarter of 2022. While land constraints have limited new development, developers have been aggressively attempting to keep pace with the economic growth and unending demand for industrial space across the region from ecommerce. Soaring demand for warehouse distribution space has caused builders to get creative in sourcing projects to develop, scouring the market for obsolete buildings with sufficient land to produce large industrial development projects. Industrial space under construction dropped 11.7 percent from the prior quarter but is up 28.2 percent compared to last year at 6.4 million square feet. With completed construction decreasing 7.3 percent quarter over quarter and 19.7 percent year to date year over year, the increased supply of industrial development has continued to fall short in the effort to keep pace with demand. Los Angeles County, over the past five quarters, averaged approximately 1.2 million square feet of completed construction added to the market while net absorption averaged 3.2 million square feet.

The average asking rent jumped up 9.8 percent from the prior quarter to $1.45 triple net, up 38.1 percent from the second quarter of 2021. The vacancy rate inched up 20 basis points from the previous quarter to a still low of 1.5 percent, 70 basis points below the second quarter of 2021. The first half of 2022 showed a loosening up, but vacancy remained low.


As the supply chain disruptions caused by the COVID-19 shutdown subside, lessened demand from ecommerce to feed distribution networks will persuade developers to moderate building large warehouse distribution facilities. In the San Gabriel Velley the largest warehouse distribution facility under construction in LA County, a 1-million square foot spec facility, remains available. While the building is expected to be completed in the third quarter of 2023, the availability of industrial space in the San Gabriel Valley has gone up 43.1 precent quarter over quarter to 6.9 million square feet. Strong rental rate growth has been a key driver of construction in the region. Rent in the San Gabriel Valley shot up 28.6 percent from last year to $1.53 per square foot triple net. Overall, in LA County, available industrial space increased 20.8 percent quarter over quarter primarily due new construction providing options for users looking for space. Nevertheless, available space remains four percent below last year at this time.

Warehouses distribution centers remain full as businesses are focusing their efforts on moving delayed inventory to make way for the holiday season heading into the second half of the year.

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