Late 2010 exhibited early signs of stability for the Los Angeles industrial real estate market. Looking to the new year, many experts believe that with a slowly improving economy and increased optimism amongst consumers, positive trends will continue throughout 2011.
On December 17th, President Obama signed into law the “Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010.” This legislation, while short lived, provides for various items including but not limited to an extension of the Bush era tax cuts, estate tax relief and new incentives for businesses that invest in machinery and equipment.
Closer to home, current vacancy rates in the Central Los Angeles market are at a relatively healthy 7.46% with a steady increase in overall transaction activity Manufacturing Industry Overview being reported. Positive absorption supports the notion that companies are coming off the sidelines, following the last two years of wait and see assessment.
The rebounding ports of both Long Beach and Los Angeles and resulting increase in container traffic will continue to drive new demand How Much Does An Electrician Apprentice Make for industrial product type as users seek out expanded facilities to support the forecasted increase in freight movement.
Business owners still appear to be the ones best positioned amongst the market place be it either through a below replacement cost purchase price or the negotiation of a new lease at very favorable terms (reduced rent, landlord concessions).
Strong market fundamentals and the scarcity of viable land sites in Los Angeles will only add increased competition amongst those seeking space when the markets fully recover. This will hold true for both users and investors alike. We can expect to see a continued focus from sophisticated and opportunistic investors seeking value added opportunities amongst underperforming or older construction assets. There remains an abundance of capital available for acquisitions and the Los Angeles industrial base has a irrefutable track record of high performance.
Despite encouraging trends, there remains a great deal of risk in the market that must be carefully monitored – pricing uncertainty, regulatory and taxation risk along with an estimated $1.4 trillion in commercial debt maturities expected through 2013 underscore the importance of staying informed.
As the Los Angeles Industrial market regains balance, investors and users seeking a unique value added purchase opportunity, will need to adopt an aggressive strategy. For those tenants seeking reduced rents, there will still be many options available to them, however, we are recommending coming to terms earlier in the year, rather than later.
