LOS ANGELES-Industrial markets throughout the Los Angeles Basin will continue to recover this year after improving significantly in the second half of 2010, according to speakers at the annual AIR Real Estate Market Review & Forecast. Adam Deierling, a vice president with Colliers International in the Mid-Cities region, tells GlobeSt.com that the AIR forecasters expressed what he would describe as "a level above cautious optimism" in the already improving industrial market throughout the five-county Los Angeles Metro area.

The annual forecast by the Downtown Los Angeles-based AIR Commercial Real Estate Association includes presentations by experts on all of the major submarkets in Los Angeles and Orange County as well as the Inland Empire. Deierling―who is a newly elected member of AIR's board of directors for 2011 and presented the outlook for the Mid-Cities submarket at the AIR forecast―said that all of the speakers "were on the same page in saying that the class A industrial product in every market in the L.A. Basin is the sector that has the most activity in 2010 and has the most promise for this year."

The AIR forecasters' presentations showed that lease rates "began stabilizing if not ticking up just a little bit in the quality product in the latter part of 2010," Deierling said. "We're all projecting that as the quality product gets absorbed, that trend will continue."

The class B and C space lagged behind last year, but activity in those classes has picked up this year as the higher-quality space has been absorbed, Deierling said. The AIR speakers agreed that, as quality product gets absorbed, occupiers will have fewer options and will buy or lease the B and C buildings. "The quality product is being leased and sold rapidly, especially compared with 2009, so it will automatically leave class B and C product as the targets for the occupiers," Deierling said.

Among the reasons for the optimism is that industrial space users who have held onto their cash throughout the downturn are now feeling more confident as they see signs of improvement in the economy, Deierling explained. "They are now willing to at least minimally invest in their companies, which entails getting very user-friendly product," he said. Tenants who didn't want to be bothered about their space needs in 2009 and who still remained hesitant last year are now going on building tours, looking for more and/or better space, he added.

This year's AIR Review & Forecast adopted a new approach by having the market forecasts presented by members of AIR’s Young Professionals Group. David Harding, an AIR board member who advanced the idea, explained: "The intent is that the Young Professionals provide a new perspective on the market that will be of special value to event attendees. All of these individuals are active and successful and are ideally qualified to express their special view of the market. All are seasoned brokers who will have a different twist to impart, particularly as regards technology and how to effectively use it in today’s marketplace.”

Deierling tells GlobeSt.com that, in addition to highlighting market activity, this year's presenters noted other positive signs, like increasing activity in Southern California's ports, which translates to increased demand for distribution space. He added the caveat that unknown factors, such as the job market and interest rates, could weigh heavily on how this year unfolds, but conditions at present suggest a steady improvement.

Panelists for the AIR event were Zack Niles, director, Industrial Advisors Group, 360 Commercial Real Estate, commenting on Orange County; Erik Hernandez, senior vice president, Lee & Associates, Inland Empire Region; Rusty Smith, associate, Cushman & Wakefield, South Bay region; Deierling, Mid-Cities region; Jeff Sanita, senior director, Cushman & Wakefield, Central region; Matt Dierckman, vice president, CB Richard Ellis, San Fernando Valley/Valencia region; T. C. Macker, senior vice president, Coldwell Banker Commercial Westmac, West Side region; Ryan Campbell, vice president, Grubb & Ellis, East Side region, and Randy Kobata, a principal, Lee & Associates, Ventura County region. The moderator was 2011 AIR president Joseph Vargas of Cushman & Wakefield.

This year's forecast contrasted sharply with the outlook at last year's AIR event, Deierling pointed out. At this time last year, the forecasters were much less confident about what to expect because of uncertainties about the economy and general market conditions.

This year's forecasters "really believe it is going to be a good year for a lot of businesses," Deierling said. "It's fun, too, because there is energy again."