Industrial Insights - October 2022
Market Overview
The industrial market is not declining as sharply as residential sectors despite rising interest rates. While transaction repricing and "price discovery" are occurring, lease rates continue climbing, indicating underlying property value growth. All-cash investors maintain the strongest position, able to negotiate lower acquisition prices while benefiting from increased lease rates. Debt-dependent investors now face 50% LTV loans as standard, with those having maturing loans requiring immediate broker consultation.
For business tenants, relief remains minimal. Though lease rate increases have moderated slightly, they persist upward. Sublease availability and smaller-space options are expanding, creating marginally improved conditions for small to medium operations seeking 50,000 SF units—a notable shift from prior scarcity.
National Statistics
- Absorption: 320 million SF in Q3 - Vacancy: Rose from 3.0% to 3.2% - Construction: 715 million SF under development; 148 million SF completed; 66% speculative - Market Development: 10 markets contain 20+ million SF under construction
Regional Markets
Orange County shows sustained inventory tightening across four consecutive quarters. Samsung's 1-million-SF lease at approximately $2.00 NNN highlights market strength. With 1.3% vacancy and 18 cities below 1.0%, the market absorbed 1.04 million SF YTD while seeing 3.96 million SF pipeline (69% preleased). Lease rates climbed 34% year-to-date, with projected 4.0-4.5% annual increases.
Los Angeles achieved $2.59 NNN as the highest recorded South Bay rent. The market absorbed 2.69 million SF with 0.8% vacancy. Class A rents now standardly reach $2.00 NNN, supporting 6.7% quarterly gains and 23.6% YTD increases. Pipeline totals 5.19 million SF with a 13% rate differential versus Inland Empire.
Inland Empire set a $2.20 NNN record with significant mega-deal volume—4 million-SF transactions this quarter, 8 YTD. Despite summer absorption pauses, rates increased 20% quarterly and 17% between Western and Eastern regions. The 39-million-SF pipeline (48% preleased) now delivers inventory matching absorption rates, with 3.4 million SF completing this quarter.
Featured Listing
A 35,000-45,000 SF Orange County sublease offering flexibility from short-term warehouse arrangement through direct landlord negotiations.
Additional Resources
Market reports available for Los Angeles County, Orange County, Inland Empire, San Diego, and national markets, plus Las Vegas, Phoenix, Dallas, Atlanta upon request.