Q2 2022 Industrial Market Outlook – Ventura County
Ventura County ’s industrial market loosened up in the second quarter of 2022, as vacant space saw a 15.2 percent increase from Q1 2022. Still, the vacancy rate remained 80 basis points below last year at an extremely low 1 percent. The average asking rent increased 8.7 percent year over year to $0.87 a square foot triple net. Since 2020, there has been limited construction added to the supply of industrial space. As the economy picked up post-pandemic demand for warehouse distribution space depleted the existing inventory, sending rent soaring. With record low vacancy, sparce development began to crop up in the region as 2,103,530 square feet of completed construction was added to the inventory year over year. Amazon’s fulfillment center in Oxnard represented about 70 percent of the newly completed construction. The other 30 precent of completed construction was also leased.
With 490,698 square feet of leasing volume year to date and vacant space at 518,741, the first half of 2022 shows industrial development is not keeping pace with continued demand. Construction has not kept up, as the pandemic accelerated ecommerce and boosted demand for last mile distribution facilities, the need remains constrained for large state of the art warehouse distribution facilities.
TRENDS TO WATCH
The absence of speculative construction in the market will continue to drive up rent and sale prices. Businesses looking for large state of the art facilities in Ventura County will need to pursue built to suit opportunities. Development has not kept up with rising demand for warehouse distribution space. While Central Ventura County experienced an 83.8 percent drop in leasing volume from 2021, in the West submarket leasing volume dropped off 54.6 percent while the vacancy rate there to plunged to virtually zero at nineteenths of a percent. The same happened in the North region with a 67.6 percent year over year decrease in leasing volume and the vacancy rate dropping to 0.7 percent. Overall, in the first half 2022, Ventura County experienced a 69.4 percent drop in leasing volume from 2021. As developers continue to observe the pressure of pent-up demand depleting industrial space and bidding up pricing, they’ll be motivated move forward with speculative construction and redevelopment opportunities.
Tenants looking to secure space, control occupancy cost, will drive sales activity. Square footage sold decreased 36.2 percent year over year, as industrial buildings for sale remained in high demand and in shorty supply. With the average sale price up 8 percent year over year, sale prices will feel the effect of rising interest rates. Constrained construction and pressure from users to lease or buy remain a driving force behind elevated prices for warehouse distribution space in Ventura County.