Southern California Office Real Estate Blog

INDUSTRIAL PROPERTY FORECAST

December 30, 2009 on 12:27 am | In Uncategorized |

INDUSTRIAL PROPERTY FORECAST

By Jodi Summers

Industrial properties in near the Southern California airports and ports were long considered to be secure investments, for seemingly obvious reasons…

1. Two of the country’s three largest ports.

2. An organized, but congested distribution hub.

3. A world of growing economies exchanging products, and the need to store these products as they arrived / departed our shores.

With the world economy at a standstill, this has certainly changed. Currently, the

Industrial market is in serious pain. Los Angeles area industrial vacancy rates are down 8.2%, and the increase in space has led to a drop in rental rates by 10% or more.

It’s a buyer’s market. Investors are saying that SoCal industrial volume sales are at their lowest in a decade. The Society for Industrial and Office Realtors (SIOR) reports, “The Industrial marketplace is suffering from decreased leasing activity, a steeper decline in rental rates, and higher levels of tenant concessions. It is also expecting higher vacancy rates.”

Industrial real estate is not alone. Although everyone would love to paint a prettier picture, currently, the commercial market is in turmoil. Research from the Realtor Commercial Alliance concludes that thus far this year, virtually all commercial sectors throughout the country are down. (Someone prove us wrong please.) The economic shift has caused the demand for commercial properties to drop precipitously, bringing down prices and rents. Add to this scenario maturing commercial debt, with credit available to bolster the need for funds…and voila, you have a jump in delinquencies and distressed properties. Sellers outnumber buyers, vacancy rates are rising in all sectors.

“You just have to hang on as best you can right now,” notes sophisticated investor, EW Moon.

SIOR notes that the Western U.S. industrial sector is suffering more than other regions of the country. “Its overall market is suffering from the largest decline in asking rents, the lowest level of leasing activity, the highest level of available sublease space, thedeepest level of landlord concessions, and higher vacancy rates. The short term outlook for the West is the lowest of all regions, with sales prices that are lower than replacement costs.

Looking forward to brighter days, there are signs that economy is no longer cannonballing into a depression. The gross domestic product (GDP) declined only 1.0% in the second quarter of 2009. This can be considered hopeful news after a 6.4% decline in 1Q 2009, and a 5.4% drop in 4Q 2008.

Are you interested in knowing the condition of your local real estate market? Email jodi@jodisummers.com to receive a free market report for your LA county neighborhood.

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http://www.realtor.org/wps/wcm/connect/83575f004f476966b69ff74e813808c1/FullCREO09August.pdf?MOD=AJPERES&CACHEID=83575f004f476966b69ff74e813808c1

http://www.socalindustrialrealestateblog.com/?p=422