The 1st Quarter 2025 Industrial Market Report for South Bay - Los Angeles - Long Beach is out.
South Bay Submarket Q1 2025 Overview Summary
- Vacancy/Availability: The vacancy rate rose to 5.6%, up 70 basis points year-over-year, with Carson (7.9%), Compton (9.7%), and Rancho Dominguez (10.8%) seeing the largest increases. High-end properties now take 12.2 months to lease, shifting leverage to tenants. Landlords are offering more concessions, with 10.28 million square feet of vacant/available space. The market needs to absorb 5.1 million square feet to return to a 3% vacancy rate.
- Rental Rates: Average asking rents fell to $1.61 NNN, down 1.4% quarter-over-quarter and 8.0% year-over-year. After a 118% rent surge from Q2 2020 to Q2 2023, increased vacancy (10 MSF added) is driving further declines until leasing rebounds.
- Construction: Construction totals 1.4 MSF, with 360,466 SF delivered in Q1. Seven buildings are under construction, but new starts are limited, and no projects are preleased. Developers are pausing, waiting for tenants or better market conditions, which may increase vacancy if leasing doesn’t improve.
- Leasing Activity/Absorption: Net absorption was positive at 561,683 SF, but cumulative absorption since Q1 2023 is negative at -4.7 million SF. Leasing volume hit 1.3 million SF across 103 transactions, below the historical 2.5 million SF quarterly average. Buildings now take six months to lease.
- Sales Activity/Investment Trends: Investor caution persists due to high interest rates and economic uncertainty, widening the bid-ask spread. Despite lower deal volume, the South Bay attracts capital due to high rents and limited land. The region is poised for an investment rebound as borrowing costs ease.
The South Bay market faces challenges with rising vacancy and declining rents but retains strong fundamentals for future growth.
Additional Reports for Midcounties, Central and Inland Empire Included.
