Los Angeles Leads Nation in Industrial Vacancy

Los Angeles is leading the nation for industrial vacancy rate. According to a new report from Newmark Knight Frank, the market has a 1.3% vacancy rate and has seen 21 consecutive quarters below 2%. Net absorption also continues to outpace new construction activity, with 4.7 million square feet absorbed in 2019. The activity is largely attributed to the robust port system in the Los Angeles area.

“More than 40% of the nation’s imports enter the U.S. through the Ports of Los Angeles and Long Beach, which combined are the nation’s busiest seaport and eighth in the world. Roughly 40% of inbound cargo stays in Southern California to clothe, feed and entertain its 22.5 million residents,” John McMillan, vice chairman at Newmark Knight Frank, tells GlobeSt.com. “2019 will likely go down as the third busiest year on record for the ports when December’s numbers are published. Transport costs account for 50% of the average distributor’s overhead, so it is in most occupier’s best interest to operate facilities within reasonable proximity of the ports.”

E-commerce activity was the driver of port activity in 2019, and as a result, led industrial leasing demand as well. “E-Commerce is dominating the headlines, but Los Angeles is also home to companies large and small doing food processing, aerospace, bio-med, garment design/sales, freezer warehouses, and all sorts of manufacturing companies,” says McMillan. “The entrepreneurial spirit, intellectual capital, educated labor force, supply chain infrastructure, and of course the Ports and weather, are all here. We just don’t have enough industrial land and buildings to handle the growth.”