... expenses such as taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, ... License
Research & Forecast Report
San Gabriel VALLEY | INDUSTRIAL Q2 2016
Accelerating success.
>> Rents Rise & Vacancy Remains Flat Key Takeaways > Average asking rents increased $0.02 PSF NNN over the quarter to end at $0.62 PSF NNN. Rents have hit the market high of $0.62 PSF NNN reached in late 2008 and are showing no signs of slowing. > Vacancy remained steady at 1.3%. Quality space is becoming increasingly hard to find and tight market conditions are making it difficult for firms to expand in the region.
Market Indicators | Relative to prior period Q2 2016
Forecast
Vacancy Net Absorption Construction Rental Rate
Summary Statistics | San Gabriel Valley, Q2 2016
> Sales and leasing activity totaled 2,019,700 SF, broken out into 10 sales (331,700 SF) and 41 leases (1,688,000 SF).
Vacancy Rate
> Net absorption totaled 736,800 SF however most of this was due to recently competed buildings.
Net Absorption
736,800 SF
Construction Completions
558,600 SF
Under Construction
808,000 SF
> There remains only 808,000 SF of space under construction as we reach the tail end of the recent construction boom that has taken place over the last two years in the San Gabriel
1.3% 00 BPS
Change from Q1 ‘16 (Basis Points)
Asking Rents | San Gabriel Valley, Q2 2016
San Gabriel Valley Industrial Market
San Gabriel Industrial Market Average Asking Rent
$0.62 PSF NNN
Change from Q1 ‘16
The San Gabriel Valley market is approaching the market peak in terms of rents and vacancy. Exceptionally low vacancy rates are leading many tenants to consider purchasing their real estate. The supply of available buildings for sale is quite low and prices for industrial properties has increased over 6% in the past year alone.
+$0.02
($)
Y.O.Y. Change (%)
+19%
Labor Force | Los Angeles County Q2 2016
12-mo Employment Growth (%) 12-mo Actual Employment Change
Construction
Manufacturing
Transportation, Trade & Utilities
4.1%
-2.1%
1.6%
+5,100
-7,600
+13,200
San Gabriel Valley | INDUSTRIAL
> The vacancy rate has remained unchanged at 1.3%, the all time low for this market.
Historical Vacancy v. Rents | San Gabriel Valley
Q2 ‘12-’16
RENTS
> Vacancy remains tightest in the Industry sub market at 0.9% and highest in the San Gabriel market at 3.4%.
8% 7%
$0.60
$ PSF PER MONTH (NNN)
> Forecast: This quarter saw the completion of 558,600 SF which was mostly leased prior to completion. Vacancy will remain low as the San Gabriel Valley is one of the most sought after markets in all of the Los Angeles Basin.
VACANCY
$0.65
6% 5%
$0.55
4% $0.50
3% 2%
$0.45
Absorption and Leasing Activity
1% $0.40
> Industrial demand was positive at 736,800 SF of net absorption. Industrial demand has increased for the previous 27 consecutive quarters. > Sales and leasing activity totaled 2,019,700 SF this quarter. There is a growing lack of property for sale, limiting the amount of net absorption that can take place.
% VACANT (TOTAL)
Vacancy
Q2 2016
0% 2Q12
2Q13
2Q14
2Q15
2Q16
Net Absorption by Submarket | San Gabriel Valley | Q2 ’16
450,000
> Forecast: Absorption will likely be higher in future quarters as recently completed buildings are absorbed by the growing businesses in the region.
400,000
368,400
391,000
INDUSTRY
FOOTHILL FREEWAY
350,000 300,000
Rental Rates
SF
250,000 200,000 150,000
> Asking rents are highest ($0.73 PSF NNN) in the infill sub market of San Gabriel, which mostly includes smaller industrial buildings. Rents are lowest in the Industry sub market ($0.61 PSF) which accounts for over 70% of the industrial space in the San Gabriel Valley. > Forecast: Rents will continue to rise in future quarters and tenants can expect to pay a premium for all types of industrial space. Tenants who signed leases 5 years ago can expect to their rent to increase roughly 40% upon renewal. This is one reason why tenants in the San Gabriel Valley chose to own their property and be insulated from fluctuating market conditions.
100,000 50,000 0 (50,000)
(22,600) SAN GABRIEL
Historical Sales & Leasing Activity | San Gabriel Valley | Q2 ‘12 - ‘16 3.5 3.0 2.5
SF (MILLIONS)
> Average asking rents increased $0.02 PSF NNN over the quarter to end at $0.62 PSF NNN. Asking rents have hit their highest point and will continue as market conditions remain favorable.
2.0 1.5 1.0 0.5 0.0 2Q12
2
2Q13
2Q14
2Q15
2Q16
San Gabriel Valley | INDUSTRIAL
Construction
Q2 2016
Historical Net Absorption & Construction Completions San Gabriel Valley | Q2 ‘12-’16
> There was 558,600 SF of space completed this quarter. The remaining 808,000 SF of space still under construction which will be finishing up by the end of the year.
NET ABSORPTION
CONSTRUCTION COMPLETIONS
1.2 1.0
> Forecast: As rental rates and sales prices continue to rise in the San Gabriel Valley, we can expect land prices to increase as demand for construction projects increase.
0.8 SF (MILLIONS)
> The majority of the recently constructed space (380,000 SF) was for a build to suit project.
0.6 0.4 0.2 0.0 2Q12
Investment Trends > Cap rates have continued to remain tight in Los Angeles County, averaging 5.8% in Q2 2016, significantly lower then the US average of 6.8%.
2Q13
2Q14
2Q15
2Q16
Investment Trends Chart
San Gabriel Valley | Q2 ‘12-’16 Average Price Per sf
> Forecast: Increased global uncertainty, especially in Europe due to the Brexit vote, has investors worried. Safe havens for capital, such as the United States, will see increased activity. Private capital is especially interested in the San Gabriel Valley as lease rates continue to increase and vacancy rates remain at historic lows.
Average Cap Rate
8.0%
$180
7.0%
$160 $140
6.0%
$120
5.0%
$100
4.0%
$80
3.0%
$60
2.0%
Outlook
$40
1.0%
$20
0.0%
> Tight market conditions are expected to persist in the San Gabriel Valley industrial marketplace. The surge in rents is prompting many users to consider buying their properties, however the available inventory is insufficient to meet demand. New projects that completed this quarter will likely be leased or sold in short order, leading to further decreases in the vacancy rate. Market conditions will continue to remain tight as the major industrial drivers of the San Gabriel Valley, import / export businesses, food manufacturing and life sciences, continue to expand.
$0 2Q12
2Q13
2Q14
2Q15
2Q16
Unemployment Rate | San Gabriel Valley | May. 2016 5.3%
5.2%
5.2% 5.1% 5.0%
4.9%
4.9% 4.8% 4.7%
4.7%
4.6% 4.5% 4.4% United States
3
California
Los Angeles County
San Gabriel Valley | INDUSTRIAL
Market Description
Q2 2016
Submarket Map
The San Gabriel Valley industrial market comprises 156.3 million square feet, and represents 12 percent of the total industrial space in buildings measuring 10,000 square feet and greater within the Los Angeles Basin. It includes a mix of newer and older buildings, 54 percent of which were built in 1980 or later. Half (50.3%) of the total space is contained in big-box buildings measuring over 100,000 square feet, with the balance (49.7%) in small to medium-sized buildings. The area has a significant concentration of firms in the high-tech sector and import/ export-related businesses.
RECENT TRANSACTIONS & MAJOR DEVELOPMENTS San Gabriel Valley Industrial Market Q2 2016
SALES ACTIVITY PROPERTY ADDRESS
SIZE SF
SALE PRICE
PRICE PSF
BUYER
SELLER
17181 Gale, City of Industry
43,400 SF
$6.4 Million
$148 PSF
WL & R LLC
L & C Management, LLC
1136 Samulson, City of Industry
21,500 SF
$3.5 Million
$164 PSF
TAT Health Group LLC
JV Capital Properties, LLC
14010 Live Oak, Baldwin Park
21,300 SF
$3.5 Million
$164 PSF
Live Oak Partners LLC
Infiniti Ent. LLC
2258 Pomona, Pomona
19,700 SF
$3 Million
$152 PSF
Exchange Resources, Inc.
Jacqmaster, LLC
PROPERTY ADDRESS
LEASED SF
LEASE TYPE
BLDG TYPE
LESSEE
LESSOR
13110 Louden, City of Industry
168,000 SF
Direct - New
Distribution
Confidential
CT ITH Industrial LLC
1601 Mission, Pomona
100,000 SF
Sublease
Distribution
USE Logistics
ProLogis
325 Baldwin, City of Industry
40,700 SF
Direct - New
Manufacturing
In N Out Burgers
Industrial Properties LLC
601 Vincent, Azusa
39,300 SF
Direct - New
Light
DJF Logistics
Indvest
PROJECT
DEVELOPER
SIZE SF
SUBMARKET
STATUS
ESTIMATED COMPLETION
La Verne Technology & Trade Center
Trammell Crow
380,000 SF
Foothill Freeway
Completed
Q2 2016
LEASING ACTIVITY
MAJOR DEVELOPMENTS
4
San Gabriel Valley | INDUSTRIAL
Q2 2016
INDUSTRIAL OVERVIEW San Gabriel Valley INDUSTRIAL OVERVIEW
Q2 2016 San Gabriel Valley Industrial Market
Q4 2015
EXISTING PROPERTIES
CONSTRUCTION
VACANCY
AVAILABILITY
ACTIVITY
ABSORPTION
RENTS
Bldgs
Total Inventory SF
10,000 - 19,999
451
6,002,700
0
0
0.2%
0.5%
0.6%
15,900
1
24,900
2
40,800
56,200
15,900
0
$0.69
20,000 - 39,999
211
5,711,000
0
0
0.8%
0.3%
0.8%
-
-
-
-
-
13,400
(26,400)
-26,400
$0.66
40,000 - 69,999
76
3,879,100
0
0
3.1%
2.8%
4.4%
-
-
19,200
1
19,200
77,400
(12,100)
24,100
$0.63
70,000 - 99,999
15
1,163,800
0
0
12.2%
12.2%
18.4%
-
-
-
-
40,700
81,400
-
-3,000
0.7
100,000- 249,999
17
2,549,500
139,200
0
16.1%
10.6%
16.1%
-
-
-
-
-
0
-
0
N/A
250,000 - 499,999
3
1,006,000
0
0
0.0%
0.0%
0.0%
-
-
-
-
-
0
-
0
N/A
500,000+
1
800,000
0
0
0.0%
0.0%
0.0%
-
-
-
-
-
0
-
0
N/A
774
21,112,100
139,200
0
3.4%
2.7%
4.1%
15,900
1
44,100
3
60,000
147,000
(22,600)
-5,300
$0.73
$0.79
Submarket/ Building Size
Completions Under Vacancy Current Qtr Construction Vacancy Prior Qtr SF SF
Availability
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
Net Absorption YTD SF
Weighted Avg Asking Lease Rates
SAN GABRIEL
Subtotal
FOOTHILL FREEWAY 10,000 - 19,999
409
5,622,000
0
0
1.1%
1.6%
2.4%
42,000
2
75,800
5
117,800
149,500
29,300
-13,700
20,000 - 39,999
209
5,505,100
0
0
0.4%
1.6%
3.7%
-
-
56,000
2
56,000
115,400
63,600
72,300
$0.73
40,000 - 69,999
87
4,324,700
0
0
0.0%
0.0%
1.2%
-
-
-
-
-
0
-
0
$0.67
70,000 - 99,999
20
1,629,800
0
0
2.5%
2.5%
2.5%
-
-
-
-
-
0
-
-41,300
N/A
100,000- 249,999
22
3,029,100
0
0
7.5%
4.8%
7.5%
-
-
39,300
1
39,300
49,800
(81,900)
-71,400
$0.59
250,000 - 499,999
5
1,706,100
380,000
0
0.0%
0.0%
0.0%
-
-
380,000
1
380,000
380,000
380,000
380,000
N/A
500,000+
0
0
0
0
0.0%
0.0%
0.0%
-
-
-
-
-
0
-
0
N/A
752
21,816,800
380,000
0
1.6%
1.7%
3.0%
42,000
2
551,100
9
593,100
694,700
391,000
325,900
$0.66
Subtotal INDUSTRY 10,000 - 19,999
807
11,280,900
0
0
1.1%
1.3%
3.2%
30,600
2
67,200
5
97,800
197,200
22,200
-53,200
$0.75
20,000 - 39,999
545
15,069,600
39,400
125,300
0.8%
0.8%
2.7%
71,200
3
45,200
3
116,400
442,700
52,800
213,900
$0.76
40,000 - 69,999
296
15,576,500
0
55,200
1.6%
1.4%
6.4%
43,400
1
208,900
5
252,300
466,000
(29,600)
121,300
$0.70
70,000 - 99,999
125
10,531,900
0
0
0.0%
1.3%
2.3%
-
-
307,200
9
307,200
576,900
131,700
69,600
$0.59
100,000- 249,999
224
31,709,600
0
197,700
0.6%
1.3%
3.0%
128,600
1
364,300
6
492,900
1,144,600
203,800
168,300
$0.59
250,000 - 499,999
59
18,273,100
0
429,800
0.9%
0.3%
1.9%
-
-
-
-
-
0
(112,500)
-168,700
$0.55
500,000+
16
10,971,100
0
0
1.3%
2.3%
1.3%
-
-
100,000
1
100,000
100,000
100,000
100,000
$0.36
2072
113,412,700
39,400
808,000
0.9%
1.2%
3.1%
273,800
7
1,092,800
29
1,366,600
2,927,400
368,400
451,200
$0.61
Subtotal MARKET TOTAL 10,000 - 19,999
1667
22,905,600
0
0
0.8%
1.1%
2.3%
88,500
5
167,900
12
256,400
402,900
67,400
-66,900
$0.77
20,000 - 39,999
965
26,285,700
39,400
125,300
0.7%
0.9%
2.8%
71,200
3
101,200
5
172,400
571,500
90,000
259,800
$0.75
40,000 - 69,999
459
23,780,300
0
55,200
1.6%
0.9%
3.3%
43,400
1
228,100
6
271,500
543,400
(41,700)
145,400
$0.74
70,000 - 99,999
160
13,325,500
0
0
1.4%
2.7%
4.2%
-
-
307,200
9
347,900
658,300
131,700
25,300
$0.66
100,000- 249,999
263
37,288,200
139,200
197,700
2.2%
2.2%
4.3%
128,600
1
403,600
7
532,200
1,194,400
121,900
96,900
$0.57
250,000 - 499,999
67
20,985,200
380,000
429,800
0.8%
0.5%
3.0%
-
-
380,000
1
380,000
380,000
267,500
211,300
$0.57
500,000+
Totals
5
17
11,771,100
0
0
1.3%
2.1%
1.3%
-
-
100,000
1
100,000
100,000
100,000
100,000
$0.40
3598
156,341,600
558,600
808,000
1.3%
1.3%
3.2%
331,700
10
1,688,000
41
2,019,700
3,769,100
736,800
771,800
$0.62
San Gabriel Valley | INDUSTRIAL
Q2 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.
6
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.
554 offices in 66 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112
> $2.5 billion in annual revenue > 2.0 billion square feet under management > Over 16,100 professionals
UNITED STATES: San Gabriel Valley Office License No. 01908231 17800 Castleton, Suite 495 City of Industry, Ca 91748
JOHN HOLLINGSWORTH Executive Managing Director THOMAS GALVIN Research Analyst Research Services
TEL: +1 909 605 9400 FAX: +1 909 937 6330
