L.A. Industrial Development Is Record Breaking

L.A. industrial development is hitting record highs. According to a report from JLL, there is currently 7.3 million square feet of industrial development in the pipeline, the highest in the history of the market. Despite the availability of developable land, builders are still finding development sites to meet the high demand. In some cases, this means building on sites that were previously considered undevelopable or redeveloping old or outdated sites. To find out more about the development pipeline, we sat down with Joe Dimola, a VP at JLL, for an exclusive interview.

GlobeSt.com: L.A. is very land constrained. How is there space for this record-breaking industrial development?

Joe Dimola: Land space for industrial development in infill Los Angeles has become extremely limited. Due to the market fundamentals and recent trends, industrial developers have been aggressively pursuing land acquisition opportunities. In infill Los Angeles, since land is very constrained, it is very common for sites improved with existing buildings to be re-developed into speculative class-A industrial development. Typically, these sites are redeveloped because they are either (1) underutilized, the existing structure has a very low site coverage, (2) the existing structures are very old and functionally obsolete to industrial users or tenants, or (3) the sites were specific to an industrial user or tenant, and the now highest and best use is a new, Class A industrial development.

GlobeSt.com: Obviously there is enough demand to absorb this product. Will this help to re-balance the market, or is this development insufficient to meet the high demand?

Dimola: The under-construction product will provide some relief but it will not sufficiently meet the high demand. Despite rising rents, tenants continue to enter the market in search of quality, functional space for their growing needs. However, eventually, tenants will become satisfied with the supply chain decisions they've made and demand may slow. Demand slowing, we're not there yet.

GlobeSt.com: When will this product deliver?

Dimola: It takes about 12 months to deliver product, taking into account construction time and city approvals, so projects that break ground down in 2017 will deliver in 2018. The market is so tight that some projects are even pre-leasing during the period of construction.

GlobeSt.com: Do you expect rents to continue to rise despite these deliveries?
Dimola: We do expect rents to continue to rise due to the supply-demand imbalance. As I said, the under-construction product will not sufficiently meet demand. Rents will continue to grow but maybe not as quickly as they have been over the past 12-18 months.

L.A. industrial development is hitting record highs. According to a report from JLL, there is currently 7.3 million square feet of industrial development in the pipeline, the highest in the history of the market. Despite the availability of developable land, builders are still finding development sites to meet the high demand. In some cases, this means building on sites that were previously considered undevelopable or redeveloping old or outdated sites. To find out more about the development pipeline, we sat down with Joe Dimola, a VP at JLL, for an exclusive interview.

GlobeSt.com: L.A. is very land constrained. How is there space for this record-breaking industrial development?

Joe Dimola: Land space for industrial development in infill Los Angeles has become extremely limited. Due to the market fundamentals and recent trends, industrial developers have been aggressively pursuing land acquisition opportunities. In infill Los Angeles, since land is very constrained, it is very common for sites improved with existing buildings to be re-developed into speculative class-A industrial development. Typically, these sites are redeveloped because they are either (1) underutilized, the existing structure has a very low site coverage, (2) the existing structures are very old and functionally obsolete to industrial users or tenants, or (3) the sites were specific to an industrial user or tenant, and the now highest and best use is a new, Class A industrial development.

GlobeSt.com: Obviously there is enough demand to absorb this product. Will this help to re-balance the market, or is this development insufficient to meet the high demand?

Dimola: The under-construction product will provide some relief but it will not sufficiently meet the high demand. Despite rising rents, tenants continue to enter the market in search of quality, functional space for their growing needs. However, eventually, tenants will become satisfied with the supply chain decisions they've made and demand may slow. Demand slowing, we're not there yet.

GlobeSt.com: When will this product deliver?

Dimola: It takes about 12 months to deliver product, taking into account construction time and city approvals, so projects that break ground down in 2017 will deliver in 2018. The market is so tight that some projects are even pre-leasing during the period of construction.

GlobeSt.com: Do you expect rents to continue to rise despite these deliveries?
Dimola: We do expect rents to continue to rise due to the supply-demand imbalance. As I said, the under-construction product will not sufficiently meet demand. Rents will continue to grow but maybe not as quickly as they have been over the past 12-18 months.