UPDATE: New reports confirm that Southern California is experiencing a dramatic surge in industrial rents, positioning it as the most expensive region in the nation for warehouse leases. As of September 2023, Orange County tops the charts with an astonishing average of $17.09 per square foot, reflecting a staggering 7% increase from the previous year.
The Los Angeles market follows closely, with rents averaging $15.59 per square foot, marking a 5% rise. This sharp escalation in leasing costs is driving demand for warehouse space in the Inland Empire, where rents appear comparatively affordable at $11.65 per square foot, yet still represent an 8% annual increase.
Southern California’s position as a logistics hub is critical, given its proximity to the bustling Los Angeles/Long Beach ports, one of the largest shipping centers globally. The region’s extensive logistical networks support the second-most populous area in the United States, making these high rents a necessity for businesses operating in the area.
Despite the steep prices, vacancy rates remain low, with the Inland Empire recording only 7.7% of available warehouse space. This figure ranks eighth among the top 30 U.S. markets. Orange County’s vacancy rate sits at 8.2%, while Los Angeles stands at 8.3%, all below the national average of 9.5%.
The implications of these rising rents extend beyond just leasing costs. In the first nine months of 2023, industrial properties in Orange County sold for an average of $306 per square foot, the second-highest in the nation, trailing only behind Detroit, where prices reached $624. In Los Angeles, warehouse properties fetched $282 per square foot, ranking third nationally, while the Inland Empire saw sales at $234 per square foot, securing the sixth position.
These escalating costs and limited vacancies are creating a challenging landscape for businesses in Southern California. The financial strain could impact supply chains, potentially leading to higher prices for goods and services as companies pass on costs to consumers.
As Southern California continues to grapple with these developments, industry experts urge stakeholders to closely monitor the evolving market dynamics. With demands for logistics space unlikely to diminish, the region’s industrial real estate sector remains a focal point for investment and economic growth.
For businesses and residents alike, these trends highlight the urgent need for strategic planning amidst rising costs. The latest data indicates that the region’s economic landscape is shifting rapidly, and keeping abreast of these changes is crucial for those impacted.
Stay tuned for more updates on this developing story as the Southern California industrial market continues to evolve.
