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NEWPORT BEACH, CA—With record-high lease rates, astounding positive absorption and the lowest vacancies on record, Southern California's industrial sector is in many ways stronger than ever, Voit Real Estate Services' VP of market research Jerry Holdner tells GlobeSt.com. With well over one billion square feet of space in a sector that employs nearly one billion people, according to Voit research, the market is a force to be reckoned with for certain. We spoke exclusively with Holdner about historical trends in the sector, looking at the stand-out data points for each market.

GlobeSt.com: What are the main historical trends you're noticing in Southern California's industrial sector?

Holdner: Each of the Southern California markets has the lowest vacancy rate on record, with record high lease rates being asked in Los Angeles and the Inland Empire. We've also seen an incredible amount of positive absorption in Southern California over the past 5.5 years at nearly 130 million square feet.  

GlobeSt.com: How are higher asking lease rates in San Diego justifiable when vacancy and availability are also higher in this market?

Holdner: San Diego is more of a niche market—it's localized and smaller and therefore steadier. A collection of smaller, highly improved medical/biotech buildings comprise this market. These achieve higher lease rates, since more of them contain a higher percentage of build-out space than in other markets.

GlobeSt.com: Do you think the Inland Empire is on pace to approach L.A.'s inventory levels at some point in the future?

Holdner: Yes, but I don't think the Inland Empire inventory will reach Los Angeles inventory levels anytime soon. Currently, the IE consists of 462 million square feet, and L.A. has 719 million square feet. The average amount of new construction from 2001 to 2014 was about 15 million square feet per year in the IE, and 4.5 million square feet in L.A., so the IE nets about 10.5 million square feet annually. We must also factor in the strong housing demand—multifamily conversions of industrial space are on the rise in L.A. All factors considered, it will take approximately 15 years for the inventory in the IE to catch up with L.A. 

GlobeSt.com: Do you expect construction in Orange County and San Diego to increase as demand increases in these markets?

Holdner: Due to the lack of available land, there won't be much increase in construction in these markets. There will be some infill sites, but the barriers to development are more acute now than ever, which puts a strain on supply. New development costs are skyrocketing due to unprecedented city fees, rapidly rising construction costs and higher land prices. Therefore, the cost of buying or leasing a new building will be expensive.

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Voit's research compares different aspects of each Southern California industrial market, showing the vast strengths of each.