Sales and leasing activity totaled 1,740,300 SF, broken out into 13 sales (775,700 SF) .... remains hard to find in this
Research & Forecast Report
SAN FERNANDO VALLEY & VENTURA COUNTY | INDUSTRIAL Q1 2017
Accelerating success.
>> Vacancy Continues To Decline & Rents Rise Key Takeaways > Vacancy declined 10 basis points to 2.0% on strong industrial demand. This is the lowest rate in recorded history for the San Fernando Valley / Ventura County marketplace. > Asking rental rates increased $0.01 PSF NNN to $0.67 PSF NNN. Rents are still below their peak of $0.68 PSF NNN in 2007. > Sales and leasing activity totaled 1,740,300 SF, broken out into 13 sales (775,700 SF) and 35 leases (964,600 SF). > Net absorption totaled 389,800 SF for the quarter. > Construction increased to 1,667,300 SF as construction activity has picked up in the San Fernando Valley.
San Fernando Valley and Ventura County Industrial Market
Market Indicators | Relative to prior period Q1 2017
Forecast
Vacancy Net Absorption Construction Rental Rate
Summary Statistics | SFV & Ventura County, Q1 2017 Vacancy Rate
2.0%
Net Absorption
389,800 SF
Construction Completions
254,800 SF
Under Construction
1,667,300 SF
Asking Rents | SFV & Ventura County, Q1 2017 SFV & Ventura County Industrial Market Average Asking Rent
$0.67 PSF NNN
Change from Q1 ‘16
The San Fernando Valley is the most populous region of Los Angeles and home to the major motion picture, music recording and television production companies. Much of the industrial infrastructure is devoted to ancillary services for the entertainment industry and population serving industrial warehouses. The San Fernando Valley has recently seen an influx of value-add investors continuing to purchase properties in the region.
-20 BPS
Change from Q4 ‘16 (Basis Points)
$0.03 PSF NNN
Y.O.Y. Change (%)
4.8%
Labor Force | Los Angeles County, Q1 2017 12-mo Employment Growth (%) 12-mo Actual Employment Change
Construction
Manufacturing
Transportation, Trade & Utilities
0.9%
-2.4%
1.1%
+1,200
-8,700
+8,700
San Fernando Valley & Ventura County | INDUSTRIAL
Vacancy
Q1 2017
Historical Vacancy v. Rents | SFV & Ventura County,
Q1 2017
> Vacancy has decreased 10 basis points to 2.0%, the lowest point ever for the San Fernando Valley.
RENTS
> Vacancy remains tightest in the East SF Valley at 0.7% and highest in the Simi Valley / Moorpark area at 4.6%.
5% 4% 4%
$0.60
3% $0.55
3% 2%
$0.50
% VACANT (TOTAL)
Absorption and Leasing Activity
5%
$0.65
$ PSF PER MONTH (NNN)
> Forecast: There remains 1,667,300 SF of space under construction which will likely increase the vacancy rate in future quarters.
VACANCY
$0.70
2% 1%
$0.45
1%
> Industrial demand was positive 389,800 SF for the quarter.
> The big winner this quarter was Simi Valley / Moorpark, which saw 456,800 SF of sales and leasing activity. > Forecast: This quarter there were two large sales that accounted for the majority of net absorption. Future quarters will likely see less net absorption until new larger buildings are completed.
0% 1Q13
1Q14
1Q15
1Q16
1Q17
Net Absorption by Submarket | SFV & Ventura County,
Q1 2017
500,000 373,200
400,000 300,000
SF
> Sales and leasing activity totaled 1,740,300 SF this quarter. This was broken out into 13 sales (775,700 SF) and 35 leases (964,600 SF).
$0.40
154,700
200,000
123,700
100,000 13,000
(27,000)
(100,000)
SIMI VALLEY/MOORPARK
EAST SF VALLEY
Historical Sales & Leasing Activity | SFV & Ventura County, Q1 2013 - 2017 2,500,000
2,000,000
1,500,000
SF
> Forecast: Rents will continue to rise in future quarters but increases will not be uniform. The discrepancy between rents in Los Angeles and Ventura Counties will likely increase in future quarters as asking rents are rising faster in Los Angeles County compared to Ventura County. Tenants who signed leases 5 years ago can expect their rent to increase a minimum of 25% upon renewal.
WEST VENTURA COUNTY
> Asking rents were highest in the Conejo Valley at $0.95 and significantly lower in Simi Valley / Moorpark at $0.59 PSF NNN. West Ventura County was the lowest at $0.57 PSF NNN.
SANTA CLARITA VALLEY
> Average asking rents held steady at $0.67 PSF NNN. Asking rents are approaching their peak of $0.68 PSF NNN which was seen in late 2007.
CENTRAL SF VALLEY
(165,900)
WEST SF VALLEY
(200,000)
(81,800)
CONEJO VALLEY
Rental Rates
0
1,000,000
500,000
0 1Q13
2
1Q14
1Q15
1Q16
1Q17
San Fernando Valley & Ventura County | INDUSTRIAL
> There was 254,800 SF added to the base this quarter and there remains 1,667,300 SF of space under construction. > One major development in the pipeline is the Sun Valley Business Center which consists of two buildings totaling 361,000 SF. This will be one of the few modern distribution buildings in the San Fernando Valley and features 32 foot clearance, ESFR sprinklers, cross dock loading and wide truck courts. > Forecast: Many of the existing buildings in the San Fernando Valley are ill-suited for modern distribution or E-commerce tenants. This will start to change as new development begins addressing the needs of modern industrial tenants. The next few years will bring an increased supply of competitive space to the San Fernando Valley.
Investment Trends
Historical Net Absorption & Construction Completions SFV & Ventura County, Q1 2013 - 2017 NET ABSORPTION
CONSTRUCTION COMPLETIONS
1,000,000 800,000 600,000
SF
Construction
Q1 2017
400,000 200,000 0 (200,000) (400,000) (600,000) 1Q13
1Q14
1Q15
1Q16
1Q17
Investment Trends Chart
Los Angeles County | Q1 ‘13-’17
> Cap rates continue to remain tight in Southern California, averaging 5.9% in Q1 2017.
Average Price Per sf
> Forecast: There has been increased investor focus on fully leased industrial assets in prime infill locations. Consequently, we expect more investment sales to occur in future quarters, driving up sales prices and further compressing cap rates.
Average Cap Rate
8.0%
$180
7.0%
$160 $140
6.0%
$120
5.0%
$100
4.0%
$80
3.0%
Outlook > The San Fernando Valley is in the middle of a building boom. Tight market conditions and rising rents are leading to a much needed increase in supply. As these newly completed buildings are leased up, we expect to see increased investor activity on these newly leased buildings. > For industrial users looking to find the ideal space to meet their needs, they will likely have to expand their industrial footprint by taking additional space in soon to be constructed speculative buildings or in build to suit projects, as quality space remains hard to find in this market.
$60
2.0%
$40
1.0%
$20
0.0%
$0 1Q13
1Q14
1Q15
1Q17
Unemployment Rate | Los Angeles County | February 2017 5.1%
5.0%
5.0% 5.0% 4.9% 4.9%
4.8%
4.8%
> Other alternatives for industrial space include the Tejon Commerce Center, which offers Class A space for larger users in the $0.40 PSF NNN range.
1Q16
4.8% 4.7%
4.7%
4.7% 4.6% 4.6% United States
3
California
Los Angeles County
San Fernando Valley & Ventura County | INDUSTRIAL
Market Description
Q1 2017
Submarket Map
The San Fernando Valley and Ventura County industrial market includes 169.8 million SF of standard industrial space, and represents 15 percent of the total industrial space in buildings 10,000 square feet and greater in the Los Angeles Basin. It is a moderately mature market, with 68 percent of its space built more than 20 years ago. The market is oriented toward small- to medium-sized manufacturers and distributors, with only 29 percent of its space contained in big box buildings (100,000+ SF).
RECENT TRANSACTIONS & MAJOR DEVELOPMENTS San Fernando Valley & Ventura County Industrial Q1 2017
SALES ACTIVITY PROPERTY ADDRESS
SIZE SF
SALE PRICE
PRICE PSF
BUYER
SELLER
709 Science, Moorpark
253,500 SF
$23 Million
$91 PSF
709 Science Drive, LLC
G & S Partnership
28903 Avenue Paine, Valencia
146,000 SF
$17.1 Million
$117 PSF
Rexford Industrial
Mannkind Corporation
700 Science, Moorpark
152,800 SF
$13.7 Million
$90 PSF
Lifetech Resources
G & S Partnership
3210 Winona, Burbank
57,700 SF
$10.5 Million
$182 PSF
Whisperin Oaks Properties
California Institute of Technology
PROPERTY ADDRESS
LEASED SF
LEASE TYPE
BLDG TYPE
LESSEE
LESSOR
10951 Los Angeles, Moorpark
234,000 SF
Renewal
Light
Pentair Water Pool & Spa
10951 W Los Angeles Ave, LP
701 W Ventura, Camarillo
93,400 SF
Direct-New
Distribution
Landsberg
Steve Zimmerman
2430 Conejo Spectrum, Thousand Oaks
90,600 SF
Direct-New
Light
Atara Biotherapeutics
Sares Regis Group
741 - 747 Calle Plano, Camarillo
42,400 SF
Direct-New
Light
Hanson Lab Furniture
741 Calle Plano, LLC
PROJECT
DEVELOPER
SIZE SF
SUBMARKET
STATUS
ESTIMATED COMPLETION
Gateway V
LNR Development
254,699
Santa Clarita Valley
Completed
Q1 2017
Conejo Spectrum
Sares Regis Group
505,378
Conejo Valley
Under Construction
Q4 2017
Tejon Ranch Commerce Center, Tejon Ranch
Tejon Ranch Company /
480,480
Tejon
Under Construction
Q4 2017
IAC Commerce Center, Phase I, Valencia
International Airport Centers
398,200
Santa Clarita Valley
Under Construction
Q3-2017
11063 Pendleton St., Sun Valley
Xebec Development
361,038
East San Fernando Valley Under Construction
Q2 2017
LEASING ACTIVITY
MAJOR DEVELOPMENTS
4
San Fernando Valley & Ventura County | INDUSTRIAL
Q1 2017
INDUSTRIAL OVERVIEW
San Fernando Valley & Ventura County Industrial Market Q1 2017 EXISTING PROPERTIES Submarket/ Building Size
Bldgs
Total Inventory SF
CONSTRUCTION
VACANCY
Completions Under Vacancy Current Qtr Construction Vacancy Prior Qtr SF SF
AVAILABILITY
Availability
ACTIVITY
ABSORPTION
Total Gross Total Gross Net Sales Number of Lease Number Absorption Activity Current Activity Activity SF Sales Activity SF of Leases Qtr SF YTD SF Current Qtr SF
RENTS
Net Absorption YTD SF
Weighted Avg Asking Lease Rates
WEST VENTURA COUNTY Subtotal
1,147
42,119,400
0
0
2.8%
3.2%
4.9%
120,700
4
287,300
7
408,000
408,000
154,700
154,700
$0.57
11,104,200
0
141,000
4.6%
8.0%
7.0%
406,300
2
50,500
2
456,800
456,800
373,200
373,200
$0.59
437
18,636,500
254,700
488,600
2.4%
1.2%
5.2%
98,000
1
300,000
8
398,000
398,000
13,000
13,000
$0.66
253
7,433,000
0
579,600
1.4%
0.3%
3.6%
0
0
0
0
0
0
(81,800)
(81,800)
$0.95
0
0
2.6%
1.9%
3.3%
19,700
1
126,000
9
145,700
145,700
(165,900)
(165,900)
$0.70
0
0
0.9%
0.7%
1.8%
15,300
1
17,400
1
32,700
32,700
(27,000)
(27,000)
$0.88
0
458,000
0.7%
1.0%
1.8%
115,800
4
183,400
8
299,200
299,200
123,700
123,700
$0.79
254,700
1,050,100
1.5%
1.2%
2.6%
248,800
7
626,800
26
875,600
875,600
(56,300)
(56,300)
$0.72
60,083,300
0
305,600
3.0%
3.8%
5.2%
526,900
6
337,800
9
864,700
864,700
446,100
446,100
$0.60
SIMI VALLEY/MOORPARK Subtotal
306
SANTA CLARITA VALLEY Subtotal CONEJO VALLEY Subtotal
WEST SAN FERNANDO VALLEY Subtotal
788
25,735,600
CENTRAL SAN FERNANDO VALLEY Subtotal
430
13,819,600
EAST SAN FERNANDO VALLEY Subtotal
1,622
50,788,700
SAN FERNANDO VALLEY SUBTOTAL Subtotal
3,293
109,525,100
VENTURA COUNTY SUBTOTAL Subtotal
1679
MARKET TOTAL 10,000 - 19,999
2416
34,107,000
0
0
0.8%
0.6%
1.9%
100,300
6
125,200
9
225,500
225,500
(45,200)
(45,200)
$0.78
20,000 - 39,999
1495
40,278,500
0
288,900
1.0%
1.0%
2.2%
105,900
3
150,600
9
256,500
256,500
(5,200)
(5,200)
$0.76
40,000 - 69,999
596
30,013,700
60,923
333,300
1.1%
0.9%
2.4%
65,200
1
227,200
6
292,400
292,400
(11,900)
(11,900)
$0.73
70,000 - 99,999
200
16,200,000
88,800
476,400
3.8%
4.1%
5.0%
98,000
1
144,900
3
242,900
242,900
137,200
137,200
$0.66 $0.62
100,000- 249,999
238
33,122,100
105,000
304,600
4.7%
4.6%
8.1%
152,800
1
280,200
7
433,000
433,000
61,400
61,400
250,000 - 499,999
29
9,378,900
0
264,100
0.8%
3.5%
0.8%
253,500
1
0
0
253,500
253,500
253,500
253,500
$0.52
500,000+
8
6,730,500
0
0
2.7%
2.7%
4.3%
0
0
36,500
1
36,500
36,500
0
0
$0.64
254,800
1,667,300
2.0%
2.1%
3.6%
775,700
13
964,600
35
1,740,300
1,740,300
389,800
389,800
$0.67
total
4982 169,830,700
5
San Fernando Valley & Ventura County | INDUSTRIAL
Q1 2017
Definitions of key terms in this report Total Rentable Square Feet: Industrial space in buildings with 10,000 SF or more of industrial space. Includes speculative as well as owner-occupied buildings. Excludes Research & Development (R&D) buildings (industrial buildings with at least 30% office build-out, 3/1000 parking ratio and a high level of finish). Excludes space that is under-construction or renovation. Vacancy: Space in existing buildings that is vacant and immediately available during the quarter for direct lease, for sublease or for sale, plus space that is vacant but not available for direct lease or sublease. Availability: All space that is being currently marketed for occupancy, includes space which may be currently occupied or which may be under construction or renovation. Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Gross Activity: Square feet sold and leased for all known transactions completed during the quarter. Excludes lease renewals. Excludes investment sale transactions. Weighted Average Asking Rental Rates: Weighted by square feet available for direct lease. Data is based on triple net rents, and excludes expenses such as taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per SF basis. Construction Completions: Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Under Construction: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy.
Technical Note Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at www. colliers.com/greaterlosangeles.
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UNITED STATES: SFV & Ventura County Office TEL: +1 818 905 5800 License No. 01908231 FAX: +1 818 325 4000 16830 Ventura Suite J Encino, CA 91436
JOHN HOLLINGSWORTH Executive Managing Director THOMAS GALVIN Research Analyst Research Services
6
> $2.6 billion in annual revenue > 2.0 billion square feet under management
