In this episode of the Industrial Insights podcast, Justin Smith interviews Jesse Gundersheim of CoStar to discuss the Q2 stats for Southern California Industrial. They cover topics such as leasing activity, vacancy rates, deliveries, and the impact of e-commerce on the market. They also touch on the sales market, cap rates, and the correlation between port imports and absorption. Overall, the conversation highlights the current state of the industrial real estate market in Southern California and provides insights into future trends.

Key Takeaways

• Leasing activity in Southern California Industrial is rebounding, with record volume leasing in the Inland Empire in Q2.
• Vacancy rates continue to rise, particularly in LA, which has the worst industrial market fundamentals in the country.
• Construction levels have dropped, but there is still a fair amount of supply in the pipeline, especially in the Inland Empire.
• Amazon is expanding its presence in the market, opening the largest industrial building in the country in Ontario and signing leases for one million square foot buildings in the Inland Empire.
• Port imports are on the rise, indicating strong demand for industrial space, and there is a correlation between port imports and absorption in the market.
• Sales activity has slowed, but there are still opportunities for investment, particularly in longer-term holds.
• Cap rates vary across the counties, with the Inland Empire having the lowest cap rate in the country.
• The market is showing signs of stabilization, with pricing potentially reaching the floor and volume starting to increase.
• The industrial real estate market in Southern California remains strong, driven by strong demand, historical rent growth, and barriers to entry.

Chapters

00:00 - Introduction and Collaboration with CoStar 02:16 - Leasing Activity and Vacancy Rates 06:08 - Construction Levels and Supply Pipeline 15:22 - Amazon's Expansion and Market Impact 19:39 - Correlation Between Port Imports and Absorption 23:05 - Sales Activity and Investment Opportunities 26:21 - Cap Rates and Pricing Trends 28:24 - Stabilization and Future Outlook of the Market

Resources

Connect with Jesse Gundersheim

• https://www.linkedin.com/in/jessegundersheim/
• [email protected]

Connect with Justin Smith

• https://smithcre.com/
• https://www.lee-associates.com/
• [email protected]
• https://www.linkedin.com/in/justinbsmith