maintenance, janitorial service and utilities. Reported on a monthly, per SF basis. Construction ... UNITED STATES: SFV
Research & Forecast Report
SAN FERNANDO VALLEY | INDUSTRIAL Q3 2016
Accelerating success.
>> Rents Continue To Rise, Construction On The Way Key Takeaways > Vacancy was unchanged over the quarter, remaining at 2.1%. The vacancy rate has been gradually declining since peaking at 5.5% in 2011. > Asking rental rates increased over the quarter by $0.01 PSF NNN to end at $0.66 PSF NNN. While increasing, rents are still below their peak of $0.68 PSF NNN in 2007. > Sales and leasing activity totaled 1,569,300 SF, broken out into 17 sales (565,600 SF) and 35 leases (1,003,700 SF). > Net absorption totaled 28,000 SF, essentially flat as supply and demand have remained in balance. > Construction has picked up in the San Fernando Valley and a number of projects broke ground this quarter.
San Fernando Valley Industrial Market
Market Indicators | Relative to prior period Q3 2016
Forecast
Vacancy Net Absorption Construction Rental Rate
Summary Statistics | San Fernando Valley, Q3 2016 Vacancy Rate
2.1%
Change from Q2 ‘16 (Basis Points) Net Absorption
28,000 SF
Construction Completions
0 SF
Under Construction
994,800 SF
Asking Rents | San Fernando Valley, Q3 2016 San Fernando Valley Industrial Market Average Asking Rent
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.
00 BPS
$0.66 PSF NNN
Change from Q2 ‘16
$0.01 PSF NNN
Y.O.Y. Change (%)
8.6%
Labor Force | Los Angeles County, Q3 2016 Construction
Manufacturing
Transportation, Trade & Utilities
12-mo Employment Growth (%)
-0.3%
-1.8%
1.0%
12-mo Actual Employment Change
-400
-6,400
+8,100
SAN FERNANDO VALLEY | INDUSTRIAL
Q3 ‘12-’16
RENTS
> Vacancy remains tightest in the Conejo Valley at 0.3% and highest in the Simi Valley / Moorpark area at 6.6%.
5%
Absorption and Leasing Activity
4%
$0.60
3% $0.55
3% 2%
$0.50
2% 1% 1%
$0.40
0% 3Q12
3Q13
3Q16
150,000
127,300
SF
100,000
50,000
30,100 0
0
(58,800)
(43,700)
WEST VENTURA COUNTY
SANTA CLARITA VALLEY
(50,000)
(13,700)
(13,200)
WEST SF VALLEY
EAST SF VALLEY
CENTRAL SF VALLEY
(100,000)
Historical Sales & Leasing Activity | San Fernando Valley | Q3 ‘12 - ‘16
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.
3Q15
Q3 ’16
Rental Rates
> Asking rents were highest in Los Angeles County at $0.74 PSF NNN and significantly lower in Venture County at $0.58 PSF NNN.
3Q14
Net Absorption by Submarket | San Fernando Valley |
> FORECAST: As new space is added to the market in future quarters, it is expected to be quickly absorbed as demand outpaces supply.
> Average asking rents increased $0.01 PSF NNN over the quarter to end at $0.66 PSF NNN. Asking rents are approaching their peak of $0.68 PSF NNN which was seen in late 2007.
% VACANT (TOTAL)
4%
$0.45
> Industrial demand was flat again for the region as there was 28,000 SF of positive absorption reported. > Sales and leasing activity totaled 1,569,300 SF this quarter. This was broken out into 17 sales (565,600 SF) and 35 leases (1,003,700 SF).
5%
$0.65
$ PSF PER MONTH (NNN)
> FORECAST: Vacancy will remain flat in future quarters as there is limited room to expand in the market. Tight market conditions will increase the time it takes for tenants to find suitable expansion space.
VACANCY
$0.70
SIMI VALLEY/MOORPARK
> Vacancy has remained flat at 2.1%, unchanged for the last three quarters.
Historical Vacancy v. Rents | San Fernando Valley |
CONEJO VALLEY
Vacancy
Q3 2016
1,000,000
500,000
0 3Q12
2
3Q13
3Q14
3Q15
3Q16
SAN FERNANDO VALLEY | INDUSTRIAL
> There were no construction completions this quarter and 994,800 SF of space remains under construction. A quarter of this space is already preleased. > 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.
Historical Net Absorption & Construction Completions San Fernando Valley | Q3 ‘12-’16
NET ABSORPTION
800,000 600,000 400,000 200,000 0
> 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
CONSTRUCTION COMPLETIONS
1,000,000
SF
Construction
Q3 2016
(200,000) (400,000) (600,000) 3Q12
3Q13
3Q14
3Q15
3Q16
Investment Trends Chart
Los Angeles County | Q3 ‘12-’16 Average Price Per sf
> Cap rates have continued to remain tight in Los Angeles County, averaging 5.8% in Q3 2016, significantly lower then the US average of 6.7%.
Average Cap Rate
8.0%
$180
7.0%
$160 $140
6.0%
> FORECAST: The San Fernando Valley has seen increased investment activity. The scarcity of core assets in Los Angeles County has pushed institutional investors to explore value add properties is more tertiary markets. Cap rates will continue to compress and sales prices will continue to rise as capital continues to flood this market.
$120
5.0%
$100
4.0%
$80
3.0%
$60
2.0%
$40
1.0%
Outlook > Flat market conditions are expected to persist in the San Fernando Valley industrial marketplace with slight upticks in rents continuing in future quarters. We are likely to see investment remaining active as a lack of available product in nearby markets is driving up sales prices throughout the Los Angeles Basin. 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.
$20
0.0%
$0 3Q12
3Q13
3Q14
3Q15
3Q16
Unemployment Rate | Los Angeles County | August 2016 5.6%
5.5%
5.4% 5.2% 5.0%
4.9%
4.9%
4.8% 4.6% 4.4% United States
3
California
Los Angeles County
SAN FERNANDO VALLEY | INDUSTRIAL
Market Description
Q3 2016
Submarket Map
The San Fernando Valley and Ventura County industrial market includes 169.6 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 Industrial Market Q3 2016
SALES ACTIVITY PROPERTY ADDRESS
SIZE SF
SALE PRICE
PRICE PSF
BUYER
SELLER
25300 Rye Canyon, Valencia
53,600 SF
$7 Million
$132 PSF
Crossroads Community Church
Reston-Sinco
10909 Tuxford, Sun Valley
47,300 SF
$7 Million
$148 PSF
San Francis Imports
Young
20660 Bahama, Chatsworth
27,300 SF
$4.7 Million
$174 PSF
Chatsworth CAS, LLC
Parker S Daryl Family Trust
1105 Industrial, Oxnard
15,000 SF
$1.1 Million
$73 PSF
LCG Industrial Ave, LLC
Smith Mongrain Property
PROPERTY ADDRESS
LEASED SF
LEASE TYPE
BLDG TYPE
LESSEE
LESSOR
12708 Branford, Sun Valley
100,100 SF
Direct - New
Distribution
Cosmetic Group, USA
Branford Group
20400 Plummer, Chatsworth
100,000 SF
Renewal
Manufacturing
Ontic Engineering & Manufacturing
Josef Rabinovitz Family Trust
3233 Mission Oaks, Camarillo
81,400 SF
Expansion
Distribution
Deckers
Rexford Industrial
100 Elevar, Oxnard
41,900 SF
Direct - New
Distribution
KAS Engineering
100 Elevar, LLC
PROJECT
DEVELOPER
SIZE SF
SUBMARKET
STATUS
ESTIMATED COMPLETION
11063 Pendleton, Sun Valley
Xebec
361,000 SF
East SF Valley
Under Construction
Q2 2017
IAC Commerce Center, Phase I Valencia
International Airport Center 398,200 SF
Santa Clarita Valley
Under Construction
Q3 2017
Valencia Gateway V, Valencia
AEW/ Sheridan Ebbert
Santa Clarita Valley
Under Construction
Q1 2017
LEASING ACTIVITY
MAJOR DEVELOPMENTS
4
254,700 SF
SAN FERNANDO VALLEY | INDUSTRIAL
Q3 2016
INDUSTRIAL OVERVIEW
San Fernando Valley & Ventura County Industrial Market Q3 2016 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 Activity Current Activity Absorption 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
3.3%
3.2%
5.8%
139,600
3
230,800
6
370,400
760,300
(58,800)
(213,600)
$0.55
11,104,200
0
0
6.6%
6.5%
10.1%
11,200
1
86,100
3
97,300
332,100
(13,200)
(164,000)
$0.59
435
18,575,700
0
652,900
1.4%
1.2%
4.6%
89,900
2
59,900
3
149,800
618,300
(43,700)
282,800
$0.65
243
7,412,046
0
74,254
0.3%
0.1%
2.7%
13,100
1
91,200
3
104,300
150,400
(13,700)
(2,700)
$0.85
0
0
2.2%
2.7%
2.7%
102,200
6
233,200
11
335,400
761,600
127,300
28,600
$0.70
0
0
0.7%
0.7%
1.2%
0
0
0
0
0
116,400
0
(73,800)
$0.92
0
458,000
1.3%
1.4%
2.9%
209,600
4
302,400
9
512,000
1,579,000
30,100
231,400
$0.76
0
1,111,000
1.5%
1.6%
2.9%
401,800
12
595,500
23
997,300
3,046,900
113,700
440,400
$0.74
60,062,200
0
74,300
3.6%
3.4%
6.3%
163,800
5
408,100
12
571,900
1,242,900
(85,700)
(380,400)
$0.58
SIMI VALLEY/MOORPARK SUBTOTAL
302
SANTA CLARITA VALLEY SUBTOTAL CONEJO VALLEY SUBTOTAL
WEST SAN FERNANDO VALLEY SUBTOTAL
789
25,750,500
CENTRAL SAN FERNANDO VALLEY SUBTOTAL
430
13,819,600
EAST SAN FERNANDO VALLEY SUBTOTAL
1,623
50,780,500
SAN FERNANDO VALLEY SUBTOTAL SUBTOTAL
3,295 109,470,900
VENTURA COUNTY SUBTOTAL SUBTOTAL
1,673
MARKET TOTAL 10,000 - 19,999
2,419
34,148,900
0
0
0.7%
0.6%
2.3%
134,200
9
144,300
9
278,500
719,600
(33,300)
(4,700)
$0.80
20,000 - 39,999
1,489
40,232,400
0
74,300
1.1%
1.2%
3.3%
88,500
3
231,800
10
320,300
1,165,300
33,200
237,000
$0.77
40,000 - 69,999
590
29,995,200
0
60,900
1.9%
2.2%
3.4%
158,600
3
366,300
11
524,900
990,200
97,400
214,300
$0.71
70,000 - 99,999
195
16,101,300
0
185,800
4.8%
4.1%
6.5%
184,300
2
40,900
1
225,200
507,800
(111,300)
(276,100)
$0.62
100,000- 249,999
237
32,974,600
0
409,700
4.7%
4.8%
6.9%
0
0
139,000
3
139,000
466,300
42,000
(540,300)
$0.60
250,000 - 499,999
29
9,378,900
0
264,100
0.0%
0.0%
3.4%
0
0
81,400
1
81,400
398,600
0
317,200
$0.52
500,000+
8
6,730,500
0
0
2.7%
2.7%
2.7%
0
0
0
0
0
70,700
0
141,400
$0.47
0
994,800
2.1%
2.1%
4.1%
565,600
17
1,003,700
35
1,569,300
4,318,500
28,000
88,800
$0.66
TOTAL
4,967 169,561,800
5
SAN FERNANDO VALLEY | INDUSTRIAL
Q3 2016
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
> $2.5 billion in annual revenue > 2.0 billion square feet under management
