Has the Valley Run Out of Industrial Space?

A year and a half into the pandemic, industrial space remains the tightest sector among commercial real estate quadrants in North Los Angeles. 

“Industrial has been doing incredibly well,” said Lee & Associates LA North/Ventura President Mike Tingus. 

Indeed, according to Colliers International data, third-quarter vacancy in the San Fernando Valley is at 0.7 percent, a big drop from the already squeaky-tight rate of 1.6 percent a year earlier. 

“We’re kind of at full capacity,” Tingus said. “A healthy market is 7 to 9 percent (vacancy).” 

The challenge is that supply is so limited while demand remains high. 

Colliers data for the Valley’s 90-million-square-foot market saw 931,806 square feet sold or leased in the quarter, a decrease quarter-over-quarter since last year’s fourth quarter, when 2.4 million square feet were sold or leased. That drop is because there’s so little space on the market. 

And the situation doesn’t appear ready to change. 

“We don’t have a ton of land,” Tingus said. “There’s been a handful of projects built in the last 10 years.” 

Tingus noted how – other than a few warehouse complexes, such as Overton Moore Properties’ massive infill project Avion Burbank – it has been a while since business parks have been built in the region.  

He points to Santa Clarita Valley, where new developments such as the Center at Needham Ranch and IAC Commerce Center quickly lease.

“Anyone that has built anything recently has been getting top rates,” Tingus said.

Colliers’ statistics showed a robust Santa Clarita at 1 million square feet sold or leased in the most recent quarter, up from 634,488 square feet in the second quarter, which represents almost double the first quarter.  

It was also in this submarket where Oxford Properties bought Southern California Innovation Park, a 119-acre industrial park, for $134 million last month. 

Conejo Valley leases

At 1.6 percent vacancy, Conejo Valley’s industrial also had a busy third quarter. Tingus, who handled leasing for Rexford Industrial Realty’s 90,000-square-foot redevelopment project at 851 Lawrence Drive in Newbury Park, saw a flurry of tenants gobble up the space between July and September. Frontier Aerospace Corp. took building A, which spans 23,893 square feet; Agoura Hills apparel company Barefoot Dreams expanded into buildings B and C, totaling 43,840 square feet; and Frontrunner Outfitters, which creates truck racks, expanded from Agoura Hills, taking 23,400 square feet in building D. 

The entire property “leased up fairly quick,” said Tingus, at $1.14 a square foot triple net. By comparison, pre-pandemic rents hovered around 85 cents per square foot, he said. 

In terms of tenants, Tingus said all industries are doing well, especially technology and entertainment.  

“There is such a scarcity of product, where do you find the buildings?” Tingus asked. “It’s becoming problematic and it’s going to get worse.” 

As a result, Tingus believes that redeveloping existing parcels will be the way forward. 

“Repurpose, re-use is going to be huge,” said Tingus, who wouldn’t be surprised if, as brick-and-mortar retail flags because of e-commerce, properties propping up malls such as Northridge Fashion Center, Oaks Mall in Thousand Oaks and Simi Valley Town Center will eventually be sold and redeveloped.