Kidder Mathews – Los Angeles Industrial Market Report

MARKET DRIVERS

We are seeing continued improvement in overall activity with relatively robust increases in tours, letters of intent, and signed leases. Sales continue to lag as cap rates have yet to catch up with today’s underwriting and cost of capital.

LEASING MARKET

There were a number of notable leases in the quarter, including Forward Air leasing the JP Morgan 300,000-foot building on Rosecrans in Compton. Dominguez Technology Center in Carson saw Agron (250,000), Prime Freight (290,000), and KW (338,000) make significant moves in a flight to A-Class buildings owned by Watson Land Company and Carson Companies. K2 Space signed a 170,000-foot lease in a Class A building built by Bridge in Torrance. After many quarters of lengthy vacancies, these new, not renewal, transactions were extremely positive for the market overall.

SALE MARKET

We are seeing an uptick of occupier buyers in the market, which we have not seen in several years. There is still plenty of institutional capital looking for deployment opportunities, but cap rates need to stabilize in the mid-sixes and the Seller community is not there, yet. Rexford’s purchase of the Herbalife site in North Torrance is still pending and when that trade transacts, that will be a solid barometer on pricing of Class A land sites in the South Bay.

NEAR TERM OUTLOOK

Landlords are meeting the market and making deals, even as rates continue to drift downward and concessions continue to increase in most instances. We believe the leasing market will continue to move toward equilibrium for the balance of the year as rates and concessions start to bottom out and firm. Aside from the occupier buyer transactions rumored to be in process, we see the sale market continuing to bump along with spotty activity through the end of the year.

Los Angeles Industrial Market Report 2024 2Q