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Los Angeles is at the center of the 2 billion-SF Southern California industrial market and is a key U.S. industrial hub. Demand draws from the 20 million Southern California residents and from goods entering the twin ports of Los Angeles and Long Beach, which combined handle nearly a third of all imports to the United States.

Since reaching record-high occupancy levels and rent growth in early 2021, demand for industrial properties has softened due to a slowing in domestic spending on consumer goods and a decline in imports entering the ports from Asia. While imports have started to rebound in the past three months compared to a year ago, the demand for industrial space is still trending lower. The vacancy rate has risen to 4.6% from 3.1% a year ago, as the market has had a sharper increase in vacancies than other major markets. Trade-dependent submarkets such as Vernon, Commerce, and City of Industry have experienced the steepest increase in vacancies. Logistics tenants have downsized as they shift their focus from growth to efficiency, often vacating older, less functional industrial properties in these submarkets.


12 Mo Deliveries in SF


12 Mo Net Absorption in SF


Vacancy Rate


12 Mo Rent Growth


12 Mo Sale Volume


Increasing available space is helping tenants negotiate new leases with friendlier terms. Excluding renewals, leasing volume from new leases in 2023 was 3% above 2019-levels, representing an increase in leasing volume of under 1 million SF. However, the amount of available space has grown to 62.5 million SF from 50.1 million SF over the same period, causing landlords to hold rates steady to draw in demand. Year-over-year rent growth has decelerated to 2.8% compared to 11.1% one year ago. However, even these figures mask the true shift in momentum, as most of the market's most recent year- over-year rent gains were achieved in late 2022 and early 2023. Asking rents fell by 0.7% during the fourth quarter.

Development activity, while growing, remains low for a market of this size. Due to development challenges in entitlements and permitting, many projects breaking ground were planned years earlier, so developers are more likely to carry projects forward even as broader market conditions soften. Development has been nearly exclusive to submarkets in the San Gabriel Valley, where there is less neighborhood opposition compared to submarkets in the west.

While sales activity has slowed nationally since the start of 2023, investors have been more active in the Los Angeles industrial market. The steep rise in rents over the past five years has many investors looking for mark- to-market opportunities, where investors are willing to accept low cap rates in exchange for future returns. These opportunities have helped prices from significantly deteriorating.

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