Industrial Insights - June 2023
School's Out for Summer
The summer of 2023 is characterized by market transition, with businesses adopting a "wait-and-see" approach while stabilizing operations. The industrial real estate sector shows distinct patterns emerging:
Key Market Trends
Lease Renewals Dominate
Year-to-date data reveals that nine of ten industrial leases exceeding 100,000 square feet were renewals. With Orange County's 35 available buildings averaging over four months on market, "the emphasis is on negotiating the best lease renewal where you can, while you can."
Sublease Activity Rising
Sublease offerings continue increasing across a six-month trend, with most spaces leasing quickly at competitive rates. This pattern signals potential pressure on direct lease rates, though decreases remain inconsistent across markets.
Recent Inland Empire subleases ranged from $1.25 to $1.45 per square foot, while direct leases tracked between $1.37 and $1.75 per square foot.
Rate Volatility
Lease rates face modest pressure compared to broader capital market turbulence. The newsletter notes that smaller and mid-sized third-party logistics providers—which fueled 2020-2022 gains—currently struggle significantly. Expectations include "modest change" for Class A properties and softening in Class B markets.
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Contact: Justin Smith, SIOR | Grant LaBounty | Chris Vassilian | Jeannette Cano Publisher: Lee & Associates, Irvine, CA