September 9, 2019
New research by JLL shows that the Los Angeles industrial market will see more than 65 million square feet of expiring leases in the next three years. Of particular note, researchers found the South Bay market accounts for more than one-third of that total, representing the most lease rollover out of any of the Southern California submarkets.
JLL’s data analyst Danny Irish writes, “More than half of the leases in the South Bay were signed in the last four years, and tenants renewing five-year leases will likely face sticker shock.”
An interesting consideration is that Class A and B facilities comprise 75% of all expiring leases in the next three years, and tenants who are unable to renew but wish to stay in Los Angeles will have to join a competitive market that is running out of space for new Class A and B industrial space.
The San Gabriel Valley is home to the largest average expiring lease size at 75,000 square feet. With far fewer blocks of space 50,000 square feet and larger than there were five years ago, tenants looking for the same amount of space or larger will likely have to turn to the Inland Empire to fulfill their distribution needs. Moving further east may actually provide some relief to tenants who don’t necessarily need to be located close to the dense Los Angeles population, as they will likely find more flexible lease terms in the Inland Empire.
Irish concludes, “If the economic market remains strong and consumer demand for e-commerce and same-day delivery holds, there should be no stagnation in leasing in the L.A. market.” He points out that although some of these expiring leases may result in vacancies, space is not expected to remain on the market for long.
For comments, questions or concerns, please contact Dennis Kaiser