Can Our Industrial Market Sustain More Growth?

LOS ANGELES—The Port of Long Beach and the Port of Los Angeles can now accommodate the world's largest container ships. The Port of Long Beach welcomed the CMA CGM Benjamin Franklin in February, and had the highest cargo volume in history, and this May, the ports will welcome the CMA CGM Benjamin Franklin and Maersk Edmonton, two of the world's largest cargo ships. However, the Southern California market already suffers from industrial supply constraints and one of the lowest vacancy rates in the nation. Can the market support this extra cargo or more growth at the ports? We sat down with industrial expert Christopher Beck, managing director at Newmark Grubb Knight Frank, to find out how the industrial real estate market will sustain future growth in this exclusive interview.

GlobeSt.com: How does the increase in cargo volumes at the port, especially now that they can accommodate the world's largest ships, affect the industrial market?

Christopher Beck: I think that this is why you are seeing all-time high pricing on industrial product and on land for industrial. The demand is so strong, not to mention debt is cheap, and that is why the industrial vacancy rate here continues to be the lowest in the United States. It is really port driven, and there is really not a significant amount of land, especially in inland Los Angeles, and that has really been the driving force to the growth of development for industrial product in the Inland Empire.

GlobeSt.com: Will the growth at the ports and the accommodation of larger ships exacerbate the industrial supply constraints?

Beck: There is no question, and that is why you have really seen industrial expand into the Inland Empire East, because at the end of the day, in order to suffice this growth, there has to be more modern constructed 30-foot clear or above facilities. The closer that you are into the basin, the older the product is. If there is land available and you build it, users will pay a premium to get as close as they can to the port.

GlobeSt.com: Will we run out of available land to develop more industrial product?

Beck: No, I don't think so. I think that is why you are seeing markets like Moreno Valley and Lake Elsinore expand. Ten to 15 years ago, those markets were tertiary at best, and now you are seeing new construction out there. I think what you will see is the demand continue to be the way that it is, and the price for industrial-zoned land continue to rise, especially due to the growth of the ports. I think you are going to continue to see growth in the Inland Empire and anywhere else where there is available land.

GlobeSt.com: Are carriers concerned about supply constraints in the industrial market around the port?

Beck: Once the goods get to the port, carriers really think about how long it is going to take them to get the goods to the consumers so that consumers can absorb those goods. The quicker that they can do that, the better. The deliverability and the accessibility is really the critical component to the whole piece.

LOS ANGELES—The Port of Long Beach and the Port of Los Angeles can now accommodate the world's largest container ships. The Port of Long Beach welcomed the CMA CGM Benjamin Franklin in February, and had the highest cargo volume in history, and this May, the ports will welcome the CMA CGM Benjamin Franklin and Maersk Edmonton, two of the world's largest cargo ships. However, the Southern California market already suffers from industrial supply constraints and one of the lowest vacancy rates in the nation. Can the market support this extra cargo or more growth at the ports? We sat down with industrial expert Christopher Beck, managing director at Newmark Grubb Knight Frank, to find out how the industrial real estate market will sustain future growth in this exclusive interview.

GlobeSt.com: How does the increase in cargo volumes at the port, especially now that they can accommodate the world's largest ships, affect the industrial market?

Christopher Beck: I think that this is why you are seeing all-time high pricing on industrial product and on land for industrial. The demand is so strong, not to mention debt is cheap, and that is why the industrial vacancy rate here continues to be the lowest in the United States. It is really port driven, and there is really not a significant amount of land, especially in inland Los Angeles, and that has really been the driving force to the growth of development for industrial product in the Inland Empire.

GlobeSt.com: Will the growth at the ports and the accommodation of larger ships exacerbate the industrial supply constraints?

Beck: There is no question, and that is why you have really seen industrial expand into the Inland Empire East, because at the end of the day, in order to suffice this growth, there has to be more modern constructed 30-foot clear or above facilities. The closer that you are into the basin, the older the product is. If there is land available and you build it, users will pay a premium to get as close as they can to the port.

GlobeSt.com: Will we run out of available land to develop more industrial product?

Beck: No, I don't think so. I think that is why you are seeing markets like Moreno Valley and Lake Elsinore expand. Ten to 15 years ago, those markets were tertiary at best, and now you are seeing new construction out there. I think what you will see is the demand continue to be the way that it is, and the price for industrial-zoned land continue to rise, especially due to the growth of the ports. I think you are going to continue to see growth in the Inland Empire and anywhere else where there is available land.

GlobeSt.com: Are carriers concerned about supply constraints in the industrial market around the port?

Beck: Once the goods get to the port, carriers really think about how long it is going to take them to get the goods to the consumers so that consumers can absorb those goods. The quicker that they can do that, the better. The deliverability and the accessibility is really the critical component to the whole piece.