Port of Long Beach The Portof Long Beach

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Today, Los Angeles is known as one of the tightest and mostpopular industrial markets in the country. However, the market aswe know it today has largely emerged in the last decade, since2010. According to a new research snapshot fromJLL shows the differences in the market between2010 and 2019. In 2010, the Los Angeles industrial market had a 7%vacancy rate, compared to 2% today. Rents have increased 67%, whilesales prices have increased more than 200%.

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"The tremendous growth of e-commerce has been a major driver ofindustrial markets everywhere this decade," PaulSablock, managing director at JLL, tells GlobeSt.com. "InSouthern California, you've got a population of over 21 millionpeople, second only to the New York tri state region. This is atremendous consumer base, and as buying preferences have continuedto shift further to the online realm, retailers have shifteddistribution strategies to meet demand. This means more reliance ondistribution space rather than brick and mortar retail space."

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The population and the shift to online shopping has been awinning combination for industrial assets, and has driven themajority of the activity in the market. "The city is where thehighest concentration of e-commerce consumers live, driving theneed to be in infill locations to serve this customer," saysSablock. "In addition to smaller distribution facilitiesservicing the "Last Mile", these last mile distribution points needto be serviced by larger facilities, 1 million-square-foot-plus,thus the Inland Empire has exploded as well."

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Asking rents now average $0.90 per square foot and free monthsare down 31% compare to 2010. Sales prices have climbed to $182 persquare foot as well. Lease terms, on the other hand are an averageof 57 months, up 14% compared to 2010. "Lease rates have risendramatically but there have been nuanced changes," says Sablock.Three-to-five year terms with options, while still prevalent, havechanged and Landlords are looking to lock in longer terms withfixed increases so as to take advantage of the increased rentalrates.  Some Landlords are now pushing 3.5% annualincreases as opposed to the typical 3% annual.  Free renthas fluctuated across the decade.  It is now being used toprop up underlying lease rates as front loaded free rent is builtinto the effective rent structure."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.