Industrial Real Estate Rental Rates Remain High in 2017

Industrial and warehouse rental rates increased over 33 percent in 2016 compared to 2014 in Los Angeles.  These high rental rates will maintain at current levels or increase in 2017, a consequence of low industrial construction development in 2016 and the continuing trend of industrial to creative office conversion.

Bulk warehouse construction occurred in the South Bay to accommodate large users of space in 2016. However, new construction for buildings the size of 5,000 to 100,000 square-feet was absent.  In addition, there are a limited amount of construction projects for industrial buildings underway in 2017.  As a result, vacancies are in the very low single digit range.  In the Westside LAX and El Segundo the vacancy rates are less than 1 percent.

Most vacant buildings are only available for lease. The few buildings that are for sale have an even lower vacancy rate; as a result, they are selling at record high prices.  Businesses looking to purchase an industrial property in Los Angeles could wait years before finding something; in addition, they may realize the price is out of their price range if they locate a building.  

One creative way for a buyer to purchase a property is to make an unsolicited offer on a property that may be listed only for lease.   The buyer should have a competent agent who is knowledgeable of the area to be able to advise them on a substantial offer that will attract the owner into selling the industrial building.

A business looking to lease an industrial building in Los Angeles should contact a commercial real estate agent who is indigenous to the area.  The broker will send out a letter to the building owners of the particular size asking if the lease will expire soon.  A good broker will have a current list of owners in the area where the tenant is considering.  Some tenants may be downsizing or thinking about selling their business; as a result, this letter may be a welcome note to the building owner.

My advice to someone looking for property to rent, is start looking very early in the search for a new home.  A period of one year should be adequate.  This may sound crazy to some; however, it is the average length of time to find an industrial property for rent in Los Angeles right now.

“I was looking for a new business space and needed a real estate broker with a keen understanding of the Los Angeles market. Lee Segal understood what we were looking for and what was important to us; he even took the extra step of anticipating how the situation might serve us in the long run. Thanks to his professional advice, we found the perfect space for the company. I will definitely work with him again if I have real estate needs in Los Angeles.”  
Joachim Wekenmann, General Manager for Weckerle Cosmetics USA