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October 22, 2017
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Historically Low Vacancy Rate Driving Up LA South Bay Industrial Property Values

5/24/17

In a market as “tight as a drum”, owners of industrial property are not asking what their building is worth. They’re asking what will the building be worth next month! That’s the central observation emerging from The Klabin Company’s South Bay “Market Update” for the first quarter of 2017.

Contributing to that tight market, the report emphasizes, are five overriding trends. They are:

• A City of Carson moratorium
• Historically low vacancy that’s driving rapid lease rate growth
• Warehousing uses being priced out of the market as trans loading takes over
• Land values reaching historical highs, and
• An ongoing emphasis on renewal of existing properties

Responding to these trends are lease and sale rates for Class A, B and C buildings, as well as industrial land, all of which are trending up. Class A building lease rates, the report shows, range from $0.78 to $0.84 net per SF; sale rates are at $200 and up. Class B building lease rates range from $0.68 to $0.72 cents net per SF, while sale prices run from $155 to $175 and up. Class C buildings run from $0.62 to $0.65 to lease, as sale prices range from $95/sf to $115/sf. In the land category, lease rates go from $0.25 to $0.30 net per SF, and sale prices check in at $50/sf and up.

The Klabin report also shows that building sale prices continue to rise on user transactions, and that there exists a historical abundance of institutional investment capital.

The report explains that user transactions in Torrance, for example, are $200/sf and up, while investor transactions in Rancho Dominguez and Carson list sub five percent CAP rates for superior credit and quality principals. Land values, according to the report, are above $50/sf, while surface lease rates are at approximately $0.30/sf.






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