Los Angeles County’s industrial market slowed for the first time in a while in the first quarter as investors and tenants evaluated their paths forward amid the coronavirus pandemic.
In the first three months of the year, the market saw a negative 2.2 million square feet of net absorption, according to data cited by Commercial Observer. That is the largest decline in square footage since 2008.
Average asking rent still climbed, reaching an all-time high of $0.93 per square foot. Vacancy hit 2.7 percent. The L.A. County market has been one of the strongest in the country during the economic expansion, showing signs of slowing only because of a lack of space.
The L.A. market has been hit particularly hard by the pandemic because of its reliance on Chinese imports through the ports of L.A. and Long Beach, according to data from JLL. The Port of L.A. reported a first quarter volume drop of 18.5 percent year-over-year. March was particularly bad, with cargo volumes dropping nearly a third year-over-year, the lowest since 2009.
Port of L.A. Executive Director Gene Seroka said that the pandemic compounded the blow the trade war with China had on imports. He said that retailers were canceling and postponing orders and expected that would continue “until we see some certainty in the U.S. economy.”
The slowdown at the ports took its toll on leasing in the Inland Empire. Leasing volume in the submarket was down 49.2 percent year-over-year, even though there was positive net absorption of 7.9 million square feet of space.
Logistics and other ecommerce-dependent business could buoy the Inland Empire moving forward, but a wide pipeline of new spaces means net absorption is likely to remain low if not negative — the market has already posted two quarters of negative net absorption. Many of the speculative industrial development projects were also put on hold, per JLL. [CO] — Dennis Lynch