Industrial Insights - December 2023
Compstak Presentation
A webinar was held featuring Compstak and industry analysis of Southern California's industrial markets. Compstak specializes in acquiring and analyzing lease comparables data. The presentation recording is available on YouTube.
Year Over Year Rent Growth Is Slowing
Rental rate increases are decelerating, though the year is still expected to finish with positive overall growth. While daily market participants may find this unsurprising, investors with limited portfolios and tenants reviewing leases infrequently might be caught off guard. Market observers anticipate the bottom is approaching soon.
Tenants Are Pushing Back
Occupiers are increasingly resisting lease rates, postponing decisions, and committing to shorter terms in hopes of securing better deals by waiting. While this strategy has some merit, the risk of allowing a building to hit the market outweighs potential savings for most executives. Despite this, numerous tenants continue actively shopping for opportunities.
Fewer Larger Deals
Large-space users show the greatest tendency to delay major commitments, while smaller tenants seeking under 100,000 square feet demonstrate robust deal velocity and activity levels.
Concessions Are Rising
Free rent concessions have increased substantially, with tenants obtaining anywhere from zero to six months free depending on deal specifics. New construction lease-ups and vacant buildings increasingly feature rent abatement, whereas renewal negotiations rarely include such concessions.
Book Release
Justin Smith's new book, Industrial Income: The Investor's Guide for Maximizing the Value of Commercial Real Estate Leases, has received strong early reception. The publication is available in paperback, Kindle, and audiobook formats on Amazon, and bulk orders are being accepted.