Vacancy Falls And Rent Continues To Rise
- The vacancy rate fell 40 basis points this quarter ending at 2.2%.
- Average rents increased by $0.02 per square foot (PSF) triple net (NNN) over the previous quarter to end at $0.82, a new high-water mark for this market. Over the past 12 months, asking rents have increased by $0.07 PSF NNN or 9.3%.
- Sales and leasing activity totaled 2,102,600 square feet this quarter, which is above average for this market. There were 25 leases in 2,070,300 square feet of space and only two sales, totaling 32,300 square feet.
- Net absorption registered 509,000 square feet this quarter, yet remains negative for the year. There is roughly 14 million square feet set to be delivered in the next six to eight months which may lead to increases in the vacancy rate. One fifth of this amount is already pre-leased, leading to positive net absorption once it is completed.
Asking rents have continued to increase as strong tenant demand and few development options lead to a shrinking supply of available space. Recent interest in last-mile distribution centers has put increased focus on the Mid- Counties, which is the geographic heart of Southern California.
Small and mid-sized companies face a similar situation as dwindling supply is driving up asking rates, which have continued to hit a new high water mark every quarter for the last two years. As rents continue to rise, industrial users continue to purchase real estate for their businesses, which is further driving up sale prices.