Fourth Quarter 2024
Ventura County Industrial Market in Q4 2024 Sees Easing Shortages of Space Along with Rising Vacancies
Rental growth persists as limited speculative construction, economic headwinds, and rising costs shape the market.
The easing shortage of industrial space overall contrasts with the continued scarcity of large, modern warehouse-distribution centers.
MARKET OVERVIEW
In Q4 2024, Ventura County’s industrial market saw a 42.6% year-over-year increase in vacant space, driven by reduced demand for warehouse-distribution facilities and an uptick in available inventory. While the vacancy rate rose by 100 basis points year-over-year, it remained relatively low at 3.5%. Rents continued to climb, increasing 10.9% year-over-year and rising by 5 cents from the prior quarter to reach $1.12 per square foot on a triple net basis.
Sublease activity also grew significantly. By the end of Q4, total available sublease space reached 205,020 square feet, reflecting a 28.3% quarter-over-quarter increase and a staggering 97.7% rise year-over-year. Despite the rental growth, low vacancy rates persist, largely due to limited new construction. Industrial development remained minimal, with construction flat compared to the previous quarter and just 91,664 square feet added in 2024.
Year-to-date leasing volume totaled 1.06 million square feet in Q4, while overall space availability climbed to approximately 2.5 million square feet. A decline in demand for warehouse space has tempered developer confidence, influenced by high interest rates, increased construction costs, and ongoing economic uncertainty.
The easing shortage of industrial space overall contrasts with the continued scarcity of large, modern warehouse-distribution centers. These facilities remain constrained due to limited speculative construction. Although e-commerce growth has cooled since its pandemic-era surge, demand for industrial space remains steady, particularly for last-mile distribution facilities.
Elevated borrowing costs and a lack of motivated sellers contributed to a 38.4% year-to-date drop in sales volume compared to the same period last year, with only 680,271 square feet sold. This reflects a broader market trend of cautious investment activity amid rising costs and economic headwinds.
TRENDS TO WATCH
Although the vacancy rate will rise, it will remain low due to limited speculative construction, the market is expected to experience a leveling of rent and sale prices. While with demand has softened, businesses seeking large, state-of-the-art facilities continue to face limited options. Elevated interest rates have further slowed industrial property sales, adding to the cautious market sentiment.
In Central Ventura County, leasing volume increased by 45.3% year-to-date compared to 2023. However, sales volume sharply declined by 91.3%, with only 17,177 square feet sold. The vacancy rate inched up to 3.0% this quarter but remained 70 basis points lower than last year, registering the lowest rate in Ventura County. North Ventura County experienced a 25.7% year-to-date increase in leasing volume, alongside an impressive 85.0% surge in sales volume over the same period. The vacancy rate rose by 80 basis points year-over-year to 3.2%. Meanwhile, West Ventura County, the largest submarket in the region, recorded the highest vacancy rate at 3.9%. Combined sales and leasing activity for 2024 fell by 35.6% year-over-year, totaling 1.7 million square feet.
Across Ventura County, leasing volume declined by 33.7% year-to-date, while total square footage sold fell by 38.4% as of Q4 2024 compared to the same period in 2023. Developers remain cautious as the market contends with rising industrial space availability, elevated construction costs, and increasing interest rates, all of which continue to hinder new development projects.
For tenants considering industrial space purchases, elevated borrowing costs necessitate careful financial planning. While rising interest rates may suppress sales activity, low inventory levels are likely to sustain average sale prices. In the current constrained construction environment, leasing continues to be the prevailing trend. This dynamic is expected to influence pricing for warehouse-distribution space into the first quarter of 2025.
