Industrial space, rental rates hold ‘steady’

MICHAEL COONS/The Acorn NEW COMMERCIAL STRUCTURES CONTINUE TO BE BUILT--Construction continues on new commercial office buildings near Rolling Oaks Drive in the city of Thousand Oaks. See story below.

"Steady" characterizes the industrial building space market throughout most of the Los Angeles Basin as vacancy rates and average asking lease rates remain relatively flat while most new construction should be readily absorbed, according to a new study by DAUM Commercial Real Estate Services, a leading regional real estate company.

The study by L.A.-based DAUM, which has offices in Los Angeles, Ventura and other counties, also reveals that gross activity in most Los Angeles Basin submarkets declined somewhat during the second quarter, an exception being Ventura County. Meanwhile, new construction activity rose.

DAUM’s study reports that overall vacancy of industrial space in Los Angeles County, for example, decreased from 4.8 percent a year ago to 4.3 percent at the end of the second quarter of this year. Meanwhile, standard industrial rental rates declined a marginal 3.7 percent year-over-year, from $0.54 triple net to $0.51triple net.

Of the four major markets within Los Angeles County, the North submarket, including the San Fernando and Santa Clarity valleys, ended the second quarter of 2003 with the highest standard industrial rental rate in the county at $0.63 triple net.

After reaching a three-year low in the third quarter of 2002, construction activity in L.A. County rose for the third consecutive quarter, according to DAUM. Currently, there’s more than 8.3 million square feet of new space under construction in the county, DAUM reports.

"Given these conditions, we expect vacancy rates to remain relatively flat in this (third) quarter, as net absorption gains should be able to absorb the new construction slated for completion. Sales activity and prices are still seeing moderate growth, as low interest rates continue to attract more buyers than sellers," said Chad Jacobson, vice president of research and marketing services for DAUM.

Los Angeles County’s office sector, DAUM reports, continued to experience modest increases in vacancy and similar declines in average rents over the past few quarters.

Overall vacancy rates (including sublease space) increased from 17.5 percent to 17.6 percent year-over-year, according to DAUM. Of the four major markets within Los Angeles County, the San Gabriel Valley market ended the second quarter of 2003 with the lowest total vacancy of 12.3 percent, followed by the North market at 15.1 percent.

Ventura County

With construction activity continuing to decline in Ventura County, DAUM forecasts industrial space vacancy to see modest decreases during this quarter, as anticipated gains in occupied space should outpace scheduled new construction deliveries.

"We expect rent levels to still stay relatively flat in this quarter, as the leasing market still remains relatively soft," said Jacobson.

DAUM reports overall vacancy rates in the county decreasing from 7.4 percent to 6.9 percent during the second quarter, with the Oxnard submarket ending the quarter with the lowest total vacancy of 5.1 percent among the submarkets with at least 5 million square feet of inventory. Since the second quarter of 2002, overall vacancy rates have increased from 6.6 percent to 6.9 percent.

Asking rental rates remained at $0.65 triple net year-over-year. The Conejo Valley submarket ended the quarter with the highest standard industrial rental rate of $0.83 triple net.

Ventura County’s office market witnessed vacancy levels remaining relatively flat during the quarter, as average rents followed, holding at $2.03 full service gross.

"Gross activity still remains weak, as the second quarter totals hit a three-year low, while net absorption was still able to manage minimal gains in occupied space. We expect vacancy to remain relatively flat through this quarter, as any new construction completions should keep pace with limited gains in occupied space," Jacobson said.