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The industrial market is leading the Southern California region for lowest cap rates. According to recent research from CBRE’s Cap Rate Survey, industrial assets have an average cap rate of 4% in the Inland Empire, Orange County and Los Angeles. The survey factored the low going-in cap rate with a 10-year hold period and projected strong rental rate growth giving the ability to generate high returns. It isn’t surprising that industrial market is seeing such low cap rates, considering the strong demand for product and the depth of capital looking to increase its exposure to industrial product.

“Industrial has been the belle of the ball, so to speak, during the last three or so years with investors from every reach of the world interested in acquiring logistics assets, given the rise of ecommerce and the importance of the Greater L.A. area as a transportation and consumer hub,” Todd Tydlaska, EVP at CBRE, tells GlobeSt.com. “As fundamentals have continued to strengthen, land values have increased and correspondingly, industrial values continue to rise. Until demand for industrial and logistics assets wanes, industrial is likely to continue to have the lowest cap rates. Southern California is the most core industrial market in the U.S., if not the world, and there simply aren’t enough assets to satisfy investor demand.”

Kelsi Maree Borland

Kelsi Borland is a freelance writer and editor living whose work has appeared in such publications as Travel + Leisure, Angeleno and Riviera Orange County.

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