12 Mo Deliveries in SF
12 Mo Net Absorption in SF
12 Mo Rent Growth
12 Mo Sale Volume
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After years of riding high, the Los Angeles industrial sector was brought back to earth in 2020. Vacancy, which started last year essentially at its lowest point in over 20 years, increased to its highest point since 2014 by the end of 2020. Although rent growth remained positive, the pace of gains continued to cool.
Sales activity in L.A. during the pandemic has been robust, and average asset pricing continues to rise. Investment pricing and activity in the sector are likely to remain robust give investment capital ready to deploy into commercial real estate remains ample, and sector conditions in L.A. have fared better better than other major property types.
Construction levels in the metro have been modest during the past decade, and this holds true with the current pipeline. High land costs and limited development sites inhibit construction, and as a result, most inventory in Los Angeles is older and smaller than in many other industrial markets across the nation. This has pushed development of large, modern distribution space in Southern California further east to the Inland Empire.
Trade volumes going through the ports of Los Angeles and Long Beach had been on the decline since early 2019 as a result of the trade war with China. Fortunately trade volumes saw a strong bounceback commence in the second half of last year. Trade war rhetoric has cooled, and the twin ports are particularly dependent on goods from China compared to other major national ports. The ports have been a strong advantage for the L.A. industrial market for decades, but this dependence on trade with China could revert to a headwind again if tensions escalate.
The market began 2021 in a less favorable position than in years past, but there are reasons for optimism beyond the near-term tribulations, especially relative to most other commercial real estate. E-commerce will continue to gain market share from brick-and-mortar retailers, pandemic or no pandemic. Severe development constraints, proximity to the largest ports on the West Coast, as well as access to Southern California megalopolis make L.A. one of the most compelling investment locations for the asset class in the world.