Here in Los Angeles, the home of award shows….Best Performing Real Estate Sector In The Recession… goes to…..envelope please….is Industrial Real Estate….yes we all have experienced rough waters…but we see some blue sky.. and we are all trying to keep a sense of humor as we view the Real Estate Markets.
AMB Property Corp. research shows, following eight quarters of negative net absorption, national industrial availability reached a historic high of 13.9% at the end of the fourth quarter, and 2009 experienced the worst industrial net absorption on record at a negative 265 million square feet. Encouragingly, this negative trend decelerated over the course of the year, slowing to a negative 38 million square feet in the fourth quarter. Tempering this drop is a halt in new construction, which came in at an all-time low of 71 million square feet in 2009. “Despite these challenging head winds, our analysis indicates that not only will demand recover, but it has already begun to do so in some submarkets,” observes David Twist, vice president of research for AMB Property Corp. “In fact, we may have reached an inflection point in many coastal markets during the fourth quarter, as demand was flat and availability was unchanged at 12.1%.”
In Southern California, take comfort in knowing that despite the recession, Los Angeles County remains the nation’s largest manufacturing center (based on jobs) and is home to the biggest port complex in the U.S. Since the economic downturn, declining global demand for U.S exports and a steep drop in domestic demand for imported goods led to a sharp slowdown in port activity. SoCal’s manufacturing and logistics industries, both of which are major users of industrial space, suffered as a result. However, as recovery began to take hold in other countries, local trade activity, particularly exports, started to show signs of life in late 2009.
The Los Angeles County Economic Development Corporation notes that the market for industrial property in Los Angeles County has shown remarkable resiliency. In spite of an increase in vacancy rates to 3.3% during the fourth quarter of 2009 from 2.2% at the end of 2008 (and 1.6% a year earlier), the industrial vacancy rate in Los Angeles County remained the lowest in the nation. Orange County’s industrial real estate market fared less well, ending the year with a 6.7% vacancy rate, up from 5.7% a year ago.
For the record, California maintained its position as the second largest state exporter in the first quarter, with total monthly exports averaging around $10.4 billion. Exports in February were up by +13.7% over the year, the fourth consecutive year-to-year increase. Our current vacancy rate is at 3.3%, according to the LAEDC . Watch the price of industrial properties climb to new highs in the next decade.
Indicators show that the demand for industrial real estate, in areas such as production and trade, are clearly rebounding. “The consensus forecast for global trade and production suggests that more than 500 million square feet of demand could be realized globally in the next few years, driving the availability rate to equilibrium levels in 2012,” summarizes Twist. The reports conclude: improving economic condition should push up industrial rents to levels necessary to support new construction requiring in the coming years. ( Credit to Jodi Summers)
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