Industrial Insights - December 2022
Rise of the Sublease!
The Southern California industrial market is experiencing increased sublease activity over the past 60 days. While not alarming, this trend warrants monitoring. The rise in available sublease space is creating downward pressure on lease rates, prompting the authors to help tenants secure discounted subleases.
Property asking prices are beginning to reappear in the market. Notably, "whisper pricing" and formal proposal terms now differ by 3-5%, making it essential for tenants to obtain multiple proposals.
The focus shifts to third-party logistics (3PL) operators, described as "the largest tenant base of any user in Southern California." Their response to post-holiday inventory adjustments and consumer spending patterns will significantly influence market direction, particularly in port-adjacent South Bay locations and the Inland Empire.
Investors remain active but increasingly conservative, seeking lower-risk opportunities. Some institutional investors face redemptions that may trigger asset sales. Developers are similarly cautious, potentially reducing land banks in select markets to facilitate owner-user transactions and build-to-suit arrangements rather than competing new developments.
Local Win
The team successfully represented a local small business consolidating and expanding within Irvine Business Complex, managing credit review, space assessment, lease advising, and legal coordination.
Team Outing
Staff gathered at Pelican Hill before Thanksgiving to celebrate a record-breaking year.
Market Reports & Media
Market reports available for Los Angeles County, Orange County, Inland Empire, Phoenix, Las Vegas, Dallas, Houston, Atlanta, Chicago, Seattle, and Northern New Jersey.
Two books are referenced: Industrial Intelligence (available now) and Industrial Income (expected Q1 2023). Podcast episodes featuring industry leaders are upcoming.
