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7/23/21
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This update was provided by NAI Capital Commercial
A year after the pandemic shutdown began, demand for warehouses is soaring, rents are rising, and developers are completing new projects. The supply of completed construction remained well below demand, supporting development to continue in the region.
Vacant industrial space declined 18.5% in Q2 2021 from Q2 2020, while the average asking rent increased 5.7% from Q2 2020 to $0.74/SF triple net. The vacancy rate fell to a new all-time low of 3.0%, down 90 bps points from Q2 2020, despite more than 10.7 msf of completed construction added to the market this year.
Trends to Watch
The depletion of land in the West will continue to drive up development, land, rent, and sale prices in the East Inland Empire. In the East, the pace of completed construction quickened this quarter, up 71.6% from this time last year, as demand remained hot. Asking rent in the East increased 10.8% from Q2 2020 to $0.82/SF triple net – on par with the West Inland Empire. The vacancy rate in the East declined 40 bps from Q2 2020, despite more than 13.2 msf of completed construction added over the same timeframe.
The Inland Empire had 140 projects totaling over 18.8 msf under construction this quarter, with an average size of 132.6k sf. Vacancy in the West plummeted to a low 2.6%, the tightest in the region, which is causing development to move further East. Eighty percent of the top 10 largest projects under construction are in the East. Land for development will continue to get scarcer and pricier, fueling higher prices for completed space, particularly along the region’s main logistics and distribution corridors.
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