Strong Market Fundamentals Across The Los Angeles Basin
The global economy enters the New Year on surer footing for the first time since the financial crisis. Synchro-
nized global growth, stabilizing oil prices, increasing manufacturing activity, and greater trade flows offer
reasons for continued optimism about the US economy in particular and the global economy as a whole.
Notwithstanding risks from restrictions in trade policy, continued job creation, stronger wage growth, and
impending tax cuts in the U.S. should buoy household wealth and spur stronger consumer spending. More-
over, 2018, like 2017, is on track to be a record-setting year for container trade volume at the Long Beach &
Los Angeles ports. Year-end numbers have yet to be tallied for 2017, but container volume at the combined
ports are already at 15.41 million TEUs through November and will easily surpass 16 million TEUs when year
end numbers are tabulated.
Greater Los Angeles continues to have the lowest vacancy of any major industrial market in the U.S. Howev-
er, with vacancy of just 2%, 2017’s leasing activity is
down 30% from last year. The tight market means
users have relatively few alternatives. Strong de-
mand is putting added pressure on markets where
both available space and land are in extremely
short supply. In the last five years, the region has
absorbed 35.0 million square feet (MSF) of space
while only adding 18.1 MSF of new product to its in-
ventory. Such momentum has generated significant
rent growth in markets across the region and avail-
able Class A and B product are leased quickly at
high rents. At year-end, direct average asking rent
increased to $.86/sf for an annual increase of 9%
from the prior year. Overall rents are up 56% from
their lows during the financial crisis. Due to accel-
erating demand for last-mile facilities, well-located
Class B properties, which five years ago may have
been considered obsolete, are now highly prized in
in-fill markets. In contrast to the big box distribution
centers which dominate the Inland Empire, last-mile
facilities are about the parking, access, and proxim-
ity to customers. These distribution centers focus
on fast throughput delivery rather than maintaining
high levels of inventory and ceiling heights are not
as important as a site’s ability to accommodate a
large number of delivery vans as well as employee
parking.
Economic Indicators
DOW JONES IND. AVERAGE
2012 13,105
2013 16,576
2014 17,832
2015 17,425
2016 19,762
2017 24,719
CRUDE OIL PRICES (USD/ BBL)
2012 101.17
2013 98.87
2014 60.55
2015 46.92
2016 52.80
2017 61.50
2012 3.04
U.S. 10 YEAR TREASURY RATES
2013 2.12
2014 1.98
2015 2.28
2016 2.28
2017 2.44
U.S. UNEMPLOYMENT RATE
Expect 2018 to be another stellar year of rent
growth for the LA industrial market, as demand out-
paces supply of industrial product.
2012 7.80
2013 6.70
2014 5.60
2015 5.00
2016 4.90
2017 4.10