LA Industrial Vacancy Falls to 6.7%, Leasing Rebounds in Q3

Los Angeles industrial vacancy ticked down 10 basis points to 6.7% in the third quarter, according to Savills’ latest market report, on 1.4 million square feet of positive net absorption, the second straight positive quarter.

Why it matters

A 10 basis point move is small on its own. The number that matters more for an operator deciding where to build or lease is the pattern underneath it: Savills attributes the stable vacancy over the past year to the market having found a bottom and now moving toward tighter conditions, not to a single strong quarter. Savills says the prior quarter also brought a surge in demand, so this is the second straight quarter of net move-ins. Other brokerages use different methodologies, so their vacancy figures are not directly comparable to Savills’ series.

The numbers

Citywide net absorption came in at positive 1.4 million square feet for the quarter. Most of that gain landed in two submarkets: Commerce/Vernon and South Bay, where Savills says the majority of the positive absorption occurred, though the report does not break out a precise figure for either. Mid-Counties moved the opposite direction, logging negative 300,300 square feet of net absorption, the one submarket pulling against the citywide number.

What’s next

For a developer or construction firm weighing where to commit industrial product in Los Angeles, the Savills read favors Commerce/Vernon and South Bay over Mid-Counties right now. Those two submarkets are doing the absorbing while Mid-Counties is still giving space back. The overall vacancy rate, still just under 7%, means this is not yet a landlord’s market. It is a market Savills describes as stabilizing, with the next quarter’s absorption split the figure to watch for whether that stabilization is accelerating.