URGENT UPDATE: Southern California has once again secured its position as the most expensive market for industrial warehouse rents in the United States. A recent report by Commercial Cafe reveals that Orange County leads the nation, with average industrial leases skyrocketing to $17.09 per square foot, marking a significant 7% increase over the past year.
In Los Angeles, industrial rents are also climbing, averaging $15.59 per square foot, which reflects a 5% rise year-over-year. With new leases in L.A. costing an average of $14.88 per square foot, the region ranks 6th nationally for new lease prices.
The report, which assessed 30 major U.S. markets as of September 2023, highlights how these exorbitant costs are driving demand for warehouse space in the Inland Empire. Here, industrial rents are comparatively lower at $11.65 per square foot, positioning the area 7th nationally and up 8% within the year. New leases in the Inland Empire average $14.58 per square foot, also ranked 7th among the surveyed markets.
Why does this matter? The high demand for warehouse space in Southern California is fueled by its critical role in logistics and distribution, particularly given its proximity to the Los Angeles/Long Beach ports, one of the largest shipping hubs globally. As the nation’s second-most populous region, the need for extensive logistical networks remains strong, keeping warehouse vacancies remarkably low.
Vacancy rates in the Inland Empire stand at 7.7% of total supply, ranking 8th lowest across the nation. Orange County and Los Angeles are similarly tight, with vacancies at 8.2% and 8.3% respectively, both below the national average of 9.5%.
As a result of these high rents and low vacancies, selling prices for industrial properties are also on the rise. In the first nine months of 2023, Orange County industrial properties sold for an eye-popping $306 per square foot, making it the 2nd highest price in the nation, trailing only Detroit at $624. In comparison, Los Angeles warehouses sold at $282 per square foot, ranking 3rd, while the Inland Empire notched $234 per square foot, landing at 6th nationally.
This surge in warehouse rents and property values underscores the intense competition and demand for logistics space in Southern California. As businesses continue to seek out prime locations for distribution and storage, the question remains: How will these escalating costs impact local economies and consumers in the coming months?
Stay tuned for further updates as the situation develops and more data becomes available.
