Q3 2022 Industrial Market Outlook – Ventura County
Ventura County’s industrial market loosened up in the third quarter of 2022, as vacant space saw a 26.6 percent increase from Q2 2022. While the vacancy rate increased 30 basis points from last year it remained at an extremely low 1.3 percent. The average asking rent increased 1.2 percent year over year to $0.85 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 2,172,180 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 additional 30 precent of completed construction was also leased.
With 661,405 square feet of leasing volume year to date, 637,309 square feet of vacant space, and zero space under construction Q3 showed industrial development not keeping pace with 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 hold 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. Year to date Central Ventura County experienced a 61.8 percent drop in leasing volume from 2021 as the vacancy rate registered a low 1.9 percent as of Q3. North Ventura leasing volume dropped off 49.9 percent with a 1-percent vacancy rate. The same happened in the West region with a 25.6 percent year over year decrease in leasing volume and a vacancy rate of 2.8 percent. Overall, in the third quarter of 2022, Ventura County experienced a 47.9 percent drop in lease 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 purchase industrial space to control occupancy cost will weigh the impact of rising interest rates to their bottom line. Square footage sold decreased 64.9 percent year over year, as the cost of borrowing squeezed sale activity. With the average sale price up 50.5 percent year over year, sale prices will feel the effect of rising interest rates. Constrained construction and pressure from users to lease versus buy remain a driving force behind pricing for warehouse-distribution space in Ventura County.TView Full REPORT