Meyer: u201cThe Inland Empire is an exceptionally strong market with a lot of potential development activity.u201d

(Save the date: RealShare Los Angeles comes to the Hyatt Regency Century Plaza in Los Angeles, CA, on March 27, 2013.)
LOS ANGELES-With two years of consecutive quarter-upon-quarter vacancy rate decline, on which GlobeSt.com previously reported, the prognosis for industrial recovery in Southern California is good, according to Craig Meyer, international director and head of logistics and industrial services group at Jones Lang LaSalle. GlobeSt.com has learned exclusively that Meyer spoke at a recent JLL West Coast industrial brokerage meeting in which the big takeaway is that the back half of 2013 looks pretty good for the SoCal industrial sector.

“We’re looking at a flat first and a robust second half with continuing rental growth rates in key markets,” Meyer tells GlobeSt.com. “During the first half, everyone will be looking at the new tax structure and figuring out what that will mean.”

Companies in greater than 80% of US markets have experienced positive absorption, so vacancy rates are going to drop, Meyer says. “The Inland Empire is an exceptionally strong market with a lot of potential development activity. We expect the Inland Empire to have roughly 3% growth in rental rates over the next year. This market has over 15 projects under construction—it’s back to the days before the recession there.”

In fact, Meyer tells GlobeSt.com that most large SoCal industrial markets will see significant year-over-year average asking rental-rate growth in warehouse and distribution space during 2013 over this year. While Sacramento say 4.3% asking rental-rate growth in between 2011 and 2012, 7.5% is expected for the subsequent year; East Bay, which saw 7.3% growth, will experience 8.7% growth; Central Valley, which actually saw a rental-rate decrease of 6.7% between 2011 and 2012, will see 11.5% growth; Los Angeles will increase from 0% growth to 3% growth; Orange County will change from 4.9% growth to between 10% and 12% growth; and San Diego will remain unchanged at 3% growth.

Meyer adds that in L.A. during 2013, “High-cube A and B-caliber buildings will garner a premium. In terms of general availability, these buildings are few, particularly when considering L.A.’s 5% vacancy rate.” In the Inland Empire, he says, “Big-box, class-A product is estimated to enjoy growth in the neighborhood of 10%.” And in Orange County, 10% to 12% growth on class-A product and 4% to 5% growth on class-B product is expected.

In addition, the average-size industrial warehouse property being delivered is increasing from a couple-hundred thousand square feet to 700,000 or 800,000 square feet, thanks to e-commerce. “The ability to fill an order with multiple SKUs is a scientific process these days,” says Meyer. “It’s an indication of the level of sophistication in these buildings and the need to drive lowest costs.”