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.
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> 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