San Gabriel ValleY | inDUSTrial - Colliers International

6 downloads 196 Views 2MB Size Report
Vacancy rates have decreased 10 basis points to 1.1%; the lowest the vacancy rate ever in the San Gabriel Valley. > S
Research & Forecast Report

San Gabriel VALLEY | INDUSTRIAL Q2 2017

Accelerating success.

>> Vacancy Falls To Lowest Rate Ever Key Takeaways

Market Indicators | Relative to prior period Q2 2017

Forecast

Construction

  

  

Rental Rate





> Vacancy rates have decreased 10 basis points to 1.1%; the lowest the vacancy rate ever in the San Gabriel Valley.

Vacancy

> Sales and leasing activity totaled 1,444,500 SF, broken out into 5 sales (247,700 SF) and 45 leases (1,196,800 SF). > Average asking lease rates held steady at $0.68 PSF NNN. Rents have been steadily increasing as vacancy rates are at historic lows. > Net absorption totaled 297,500 SF for the quarter, the 27th concecutive quarter of growing industrial demand. > There remains 1,635,600 SF of space under construction. The San Gabriel Valley is a tight infill market with few oportunities to develop additional industrial space.

Net Absorption

Summary Statistics | San Gabriel Valley, Q2 2017 Vacancy Rate

1.1% -10 BPS

Change from Q1 ‘17 (Basis Points) Net Absorption

297,500 SF

Construction Completions

0 SF

Under Construction

1,635,600 SF

Asking Rents | San Gabriel Valley, Q2 2017 San Gabriel Industrial Market

San Gabriel Valley Industrial Market

Average Asking Rent

$0.68 PSF NNN

Change from Q2 ‘16

+$0.05

($)

The San Gabriel Valley consists of 31 cities and 400 square miles, with over 1.8 million residents. International trade, especially with the Pacific Rim, continues to be a vital aspect of the growing economy. The San Gabriel Valley market has surpassed the previous market peak in terms of rents. Exceptionally low vacancy rates and rising rental rates are leading many tenants to consider purchasing their real estate.

Y.O.Y. Change (%)

+7.9%

Labor Force | Los Angeles County Q2 2017

12-mo Employment Growth (%) 12-mo Actual Employment Change

Construction

Manufacturing

Transportation, Trade & Utilities

5.3%

-1.5%

-0.4%

+7,000

-5,600

-3,500

San Gabriel Valley | INDUSTRIAL

> The vacancy rate has decreased 10 basis points to 1.1% as market conditions continue to tighten.

Historical Vacancy v. Rents | San Gabriel Valley

Q2 ‘13-’17

RENTS

> Forecast: Future quarters will see more industrial space brought to the market. It is expected this will have little impact on the vacancy rate as the San Gabriel Valley remains one of the most sought after markets in all of the Los Angeles Basin.

$ PSF PER MONTH (NNN)

> Vacancy remains tightest in the San Gabriel sub market at 0.4% and highest in the Foothill Freeway market at 1.6%.

Absorption and Leasing Activity

VACANCY

0.8

8%

0.7

7%

0.6

6%

0.5

5%

0.4

4%

0.3

3%

0.2

2%

0.1

1%

0

> Industrial demand reported 297,500 SF of positive net absorption. Industrial demand has increased for the previous 27 consecutive quarters. > Sales and leasing activity totaled 1,444,500 SF this quarter. There is a growing shortage of property for sale, limiting the amount of net absorption that can take place.

% VACANT (TOTAL)

Vacancy

Q2 2017

0% 2Q13

2Q14

2Q15

2Q16

2Q17

Net Absorption by Submarket | San Gabriel Valley | Q2 ’17

> Forecast: Absorption will likely be higher in future quarters as recently completed buildings are absorbed by the growing businesses in the region.

300,000

275,200

250,000

Rental Rates > Average asking rents have remained stable at $0.68 PSF NNN. Asking rents have hit their highest point and will continue to increase as long as market conditions remain favorable.

SF

200,000

150,000

100,000

50,000 12,400

> Asking rents are highest ($0.74 PSF NNN) in the Foothill Freeway submarket and are lowest in the Industry sub market ($0.63 PSF).

INDUSTRY

FOOTHILL FREEWAY

SAN GABRIEL

Historical Sales & Leasing Activity | San Gabriel Valley | Q2 ‘13 - ‘17 3.5 3.0 2.5

SF (MILLIONS)

> Forecast: Rents have continued to press upward, blowing past their previous peak and will continue to rise in future quarters. Tenants can expect to pay a premium for all types of industrial space and those who signed leases 5 years ago can expect to their rent to increase roughly 30% upon renewal. This is the primary reason why tenants in the San Gabriel Valley choose to own their property and be insulated from fluctuating market conditions.

9,900

0

2.0 1.5 1.0 0.5 0.0 2Q13

2

2Q14

2Q15

2Q16

2Q17

San Gabriel Valley | INDUSTRIAL

Construction

Q2 2017

Historical Net Absorption & Construction Completions San Gabriel Valley | Q2 ‘13-’17

> There were no new construction completions this quarter and there remains 1,635,600 SF of space remaining under construction.

> Forecast: As rental rates and sales prices continue to rise in the San Gabriel Valley, there is increased pressure to develop and reposition functionally obsolete industrial space.

CONSTRUCTION COMPLETIONS

1.0 0.9 0.8 0.7 SF (MILLIONS)

> Land remains at a premium, with industrial developable land topping over 1.2 million per acre. Rising industrial rents and limited availability will lead to higher land prices in future quarters.

NET ABSORPTION

0.6 0.5 0.4 0.3 0.2 0.1

Investment Trends > Cap rates continue to remain tight in Los Angeles County, averaging 4.9% in Q2 2017. > 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.

0.0 2Q13

2Q14

2Q15

2Q16

2Q17

Investment Trends Chart

San Gabriel Valley | Q2 ‘13-’17 Average Price Per sf

Average Cap Rate

8.0%

$180

7.0%

$160 $140

6.0%

Outlook > Tight market conditions, limited development and rising industrial rents 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.

$120

5.0%

$100

4.0%

$80

3.0%

$60

2.0%

$40

1.0%

$20

0.0%

$0 2Q13

2Q14

2Q15

2Q16

2Q17

Unemployment Rate | San Gabriel Valley | May 2017 4.8%

4.7%

4.7% 4.6% 4.5%

4.4%

4.4% 4.3% 4.2% 4.1%

4.1%

4.0% 3.9% 3.8%

3

United States

California

Los Angeles County

San Gabriel Valley | INDUSTRIAL

Market Description

Q2 2017

Submarket Map

The San Gabriel Valley industrial market comprises 156.2 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 (44.6%) 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 2017

SALES ACTIVITY PROPERTY ADDRESS

SIZE SF

SALE PRICE

PRICE PSF

BUYER

SELLER

488 Parriott City of Industry

84,700 SF

$14.5 Million

$171 PSF

Renna Family Partnership

CRPR Parriott, LLC

4185 Temply, El Monte

42,900 SF

$7.9 Million

$185 PSF

AG & H, LLC

The Gill Corporation

1941 Mission, Pomona

40,700 SF

$7.1 Million

$174 PSF

Zoe Ents, LLC

PSIP Chi Pomona, LLC

4185 Temple, El Monte

30,200 SF

$5.8 Million

$191 PSF

JTMB LLC

The Gill Corporation

PROPERTY ADDRESS

LEASED SF

LEASE TYPE

BLDG TYPE

LESSEE

LESSOR

4545 Brooks, Montclair

129,900 SF

Direct - New

Distribution

Anheuser - Busch, LLC

4545 Brooks LLC

3963 Workman, City of Industry

105,400 SF

Sublease

Distribution

Logistic Edge, LLC

Michael Kors Inc.

20035 Walnut, City of Industry

95,900 SF

Direct - New

Distribution

Goodman Distribution

ProLogis

341 Baldwin, City of Industry

46,800 SF

Direct - New

Light

Fortune Seasons Corp.

Amrapur Overseas, Inc.

PROJECT

DEVELOPER

SIZE SF

SUBMARKET

STATUS

ESTIMATED COMPLETION

825 Ajax, City of Industry

Bridge Development

429,900 SF

Industry

Under Construction

Q3 2017

12359 Lower Azusa, Arcadia

Yellow Iron

328,800 SF

Foothill Freeway

Under Construction

Q3 2017

LEASING ACTIVITY

MAJOR DEVELOPMENTS

4

San Gabriel Valley | INDUSTRIAL

Q2 2017

INDUSTRIAL OVERVIEW San Gabriel Valley INDUSTRIAL OVERVIEW

Q2 2017 San Gabriel Valley Industrial Market

Q4 2015

EXISTING PROPERTIES

Submarket/ Building Size

Bldgs

CONSTRUCTION

Total Inventory SF

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

SAN GABRIEL 10,000 - 19,999

452

6,021,900

0

0

0.5%

0.0%

1.1%

-

-

16,200

1

16,200

44,100

(33,000)

-33,000

$0.79

20,000 - 39,999

212

5,744,200

0

0

0.9%

0.9%

3.3%

-

-

-

-

-

36,900

-

36,800

$0.65

40,000 - 69,999

76

3,879,100

0

0

0.0%

0.0%

0.5%

-

-

-

-

-

0

-

0

$0.63

70,000 - 99,999

15

1,163,800

0

0

0.0%

3.7%

2.2%

73,200

1

-

-

40,700

81,400

42,900

106,400

0.62

100,000- 249,999

17

2,549,500

0

0

0.0%

0.0%

6.4%

-

-

-

-

-

178,900

-

164,300

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

776

21,164,500

0

0

0.4%

0.4%

2.2%

73,200

1

16,200

1

89,400

438,390

9,900

274,500

$0.72

$0.85

Subtotal

FOOTHILL FREEWAY 10,000 - 19,999

408

5,613,600

0

0

0.8%

1.0%

1.8%

-

-

44,600

3

44,600

58,900

14,200

14,200

20,000 - 39,999

208

5,456,600

0

30,600

1.1%

1.9%

4.6%

-

-

45,500

2

45,500

65,900

45,500

45,500

$0.72

40,000 - 69,999

87

4,280,000

0

47,300

1.4%

1.4%

3.5%

-

-

-

-

-

52,800

-

-58,600

$0.69

70,000 - 99,999

21

1,636,600

0

85,600

0.0%

0.0%

4.4%

-

-

96,600

2

96,600

211,900

-

115,300

N/A

100,000- 249,999

22

2,715,300

0

258,100

6.8%

5.0%

10.3%

-

-

10,500

1

10,500

22,100

(47,300)

-47,300

$0.69

250,000 - 499,999

6

1,706,100

0

328,800

0.0%

0.0%

0.0%

-

-

84,200

1

84,200

84,200

-

0

N/A

500,000+

0

0

0

0

-

-

-

-

-

-

-

-

0

-

0

N/A

752

21,408,200

0

750,400

1.6%

1.7%

4.0%

-

-

281,400

9

281,400

495,800

12,400

69,100

$0.74

Subtotal INDUSTRY 10,000 - 19,999

798

11,198,300

0

0

0.1%

0.5%

1.4%

10,100

1

162,500

12

172,600

310,300

39,600

33,800

$0.75

20,000 - 39,999

549

15,240,700

0

86,800

0.8%

1.3%

2.4%

31,200

1

147,800

7

179,000

422,600

73,400

183,800

$0.78 $0.70

40,000 - 69,999

301

15,678,300

0

200,600

2.6%

3.0%

5.6%

48,500

1

114,300

4

162,800

493,900

158,700

158,500

70,000 - 99,999

126

10,623,800

0

0

1.6%

3.3%

6.3%

84,700

1

123,000

4

207,700

580,400

183,700

81,000

$0.70

100,000- 249,999

223

31,655,900

0

168,000

1.8%

1.2%

3.7%

-

-

336,100

7

336,100

1,100,500

(180,200)

-315,500

$0.60

250,000 - 499,999

59

18,290,300

0

429,800

0.0%

0.0%

0.0%

-

-

15,500

1

15,500

15,500

-

0

$0.55

500,000+

16

10,971,100

0

0

0.0%

0.0%

4.4%

-

-

-

-

-

0

-

0

$0.42

2072

113,658,400

0

885,200

1.2%

1.3%

3.3%

174,500

4

899,200

35

1,073,700

2,923,200

275,200

141,600

$0.63

10,000 - 19,999

1658

22,833,800

0

0

0.4%

0.5%

1.4%

10,100

1

223,300

16

233,400

413,300

20,800

15,000

$0.77

20,000 - 39,999

969

26,441,500

0

117,400

0.9%

1.5%

3.4%

31,200

1

193,300

9

224,500

525,400

118,900

266,100

$0.76

Subtotal MARKET TOTAL

40,000 - 69,999

464

23,837,400

0

247,900

2.0%

1.4%

2.8%

48,500

1

114,300

4

162,800

546,700

158,700

99,900

$0.72

70,000 - 99,999

162

13,424,200

0

85,600

1.3%

3.4%

6.5%

157,900

2

219,600

6

345,000

873,700

226,600

302,700

$0.70

100,000- 249,999

262

36,920,700

0

426,100

2.0%

1.4%

4.4%

-

-

346,600

8

346,600

1,301,500

(227,500)

-198,500

$0.61

250,000 - 499,999

68

21,002,400

0

758,600

0.0%

0.0%

0.0%

-

-

99,700

2

99,700

99,700

-

0

$0.57

17

11,771,100

0

0

0.0%

0.0%

4.1%

-

-

-

-

-

0

-

0

$0.55

0

1,635,600

1.1%

1.2%

3.3%

247,700

5

1,196,800

45

1,444,500

3,857,400

297,500

485,200

$0.68

500,000+

Totals

5

3,600 156,231,100

San Gabriel Valley | INDUSTRIAL

Q2 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.

396 offices in 68 countries on 6 continents United States: 153 Canada: 29 Latin America: 24 Asia Pacific: 79 EMEA: 111

> Over 15,000 professionals

UNITED STATES: San Gabriel Valley Office License No. 01908231 17800 Castleton, Suite 495 City of Industry, Ca 91748

HANS MUMPER

Executive Managing Director Greater Los Angeles

THOMAS GALVIN Research Analyst Research Services 6

> $2.6 billion in annual revenue > 2.0 billion square feet under management

TEL: +1 909 605 9400 FAX: +1 909 937 6330