A Strong Fourth Quarter Negates Early Losses
- The headline numbers have exceeded expectations in the fourth quarter of 2020. In the midst of a pandemic-induced recession, the vacancy rate has fallen 50 basis points, net absorption turned positive, construction activity increased and rents remain at all-time highs.
- This rising tide has not lifted all boats, however. For the year, Los Angeles County closed out with negative 2.9 million square feet of absorption, whereas the Inland Empire and Orange County finished the year with positive 24.9 million square feet.
- This quarter saw the release of pent-up industrial demand emerging from the prior quarter’s economic shutdown. This is the easy part of the recovery.
Greater Los Angeles Industrial Market
The Los Angeles Basin industrial market is the largest in the United States, totaling more than 1.7 billion square feet. It has been characterized by some of the highest asking rates and lowest vacancy rates of any market in the nation. The Ports of Los Angeles and Long Beach are the primary industrial drivers making up for lost time. In the last 3 months, port activity surpassed 2019 levels, as a growing backlog of cargo is making its way through the nation’s supply chain.
E-commerce has proven to be the saving grace for the industrial market. Consumers have accelerated their adoption of purchasing goods online. E-commerce has seen as much
growth in the last 9 months as it has in the last decade, and these changes look to be permanent. The world will need more industrial buildings and fewer retail stores.