IRVINE, CA-The Orange County industrial sector is experiencing a “dramatic sea change with lease rates and vacancy rates,” according to Louis Tomaselli, senior managing director with Jones Lang LaSalle. Tomaselli and two other JLL executives spoke about the Southern California industrial sector in a series of videos recently produced by the firm.

“Landlords who have been on the shorelines for several years seeing tenants use their leverage” to get lower rental rates and concessions now have the upper hand as industrial vacancy rates are almost at 2008 lows in Orange County, Tomaselli said. “We're projecting a 10% to 20% increase in lease rates in Orange County industrial.”

Tomaselli advised landlords to take control of market conditions and leverage them to their advantage, and he advised tenants to get friendly with their landlords and “forget the last four years because they're over.” Regarding development, Tomaselli said literally “raising the roof” on many industrial properties by up to 12 ft. will be necessary in order to meet new clearance standards.

Meanwhile, the Inland Empire is also experiencing robust industrial leasing activity, said JLL managing director Peter McWilliams in another video. The area has enjoyed a 15% year-over year increase in absorption, so much so that it's justifiable to build a lot of spec space—in fact, there is more than 9 million square feet of spec industrial currently under construction in the region and much of it preleased. The next big trend in Inland Empire industrial development will be the product type that suffered the most during the recession: under 200,000-square-foot, single-tenant properties.

“The housing recovery is starting to spawn growth,” said McWilliams. “Rents are well below what you see” typically when building spec, but this is starting to change. Also, bricks-and-mortar companies that ware putting into operation e-commerce and e-fulfillment centers have spurred growth in the industrial sector, and consolidation and technological advances in warehouse-handling systems is encouraging development.

In addition, the investment market for industrial properties throughout Southern California is “red hot,” said Bo Mills, managing director of JLL's capital markets group, in another video. Cap rates are at historic lows, which creates a problem in that there aren't very many sellers. “It's difficult to find product, and once you buy it, you don't want to let it go,” Mills explained.

The massive amount of capital looking to invest in industrial real estate because it is seen as a safe haven is driving investment in Southern California, Mills added. “There's also a huge tenant demand gobbling up available space. It's the most secure market in Southern California, and that's where they want to be.”

The long entitlement process is making industrial development very difficult, but tenant demand should enable the fundamentals to stay in balance for the foreseeable future, Mills concluded. “If you can buy a deal today, it will seem like a very good value tomorrow.”

To view the videos in their entirety, click here.