Dimola: With the lack of available land, there is limited new product available. As the new product is all being absorbed, users will look to class B or C product as the alternative solution. Since the majority of the infill industrial product is old and functionally obsolete, in order for users to operate in them, modifications need to be made to the building to improve the operational efficiency.

GlobeSt.com: How will this affect rental rates in 2017?

Dimola: We expect 2017 to be a year of strong industrial real estate performance. Rental rates in 2017 will continue to increase due to the shrinking vacancy and supply-demand imbalance. So many users have been actively in the market for so long, that there will be a point where they've managed to employ their real estate and supply chain decisions and in return demand will slow.

GlobeSt.com: What types of tenants are winning lease deals in this market?

Dimola: The L.A. industrial tenant mix is quite diverse with companies in the 3PL, clothing, furniture, food, packaging, and manufacturing businesses. From a Landlord's perspective, a tenant's overall credit worthiness plays an important role in determining their best fit. That being said, companies with stronger credit and financial stability are winning the lease deals in LA.

LOS ANGELES—Industrial vacancy rates are continuing to plummet even as new product is delivered. Last year, Los Angeles gained 3.9 million square feet of industrial space, compared to roughly 3 million square feet delivered in 2015. At the end of the year, however, vacancy rates in the Los Angeles market were at an all-time low of .9%, compared to 2.2% at the end of 2015. With land already limited for new development, opportunities for new supply are becoming more and more limited. As a result, rents are expected to skyrocket this year as tenants try to vie for space in the Los Angeles market. To get some expert perspective on the dilemma, we sat down with Joe Dimola, VP at JLL, for an exclusive interview.

GlobeSt.com: Is the low industrial vacancy rate becoming a serious issue for our industrial market? How does it hinder growth?

Joe Dimola: The low industrial vacancy is only a serious issue on the tenant/buyer side. At the term of their lease, tenants face rising rents and a lack of suitable relocation alternatives. Growth is only hindered for tenants who are concerned about rising rents and have an absolute need to be port proximate. Otherwise, growing tenants can look to relocate in outlying areas such as the Inland Empire. Landlords, however, are benefiting tremendously and holding the most, if not all, leverage in lease or sale negotiations.

GlobeSt.com: If the new product is all being absorbed, what is an alternative solution, especially with the lack of available land?

Dimola: With the lack of available land, there is limited new product available. As the new product is all being absorbed, users will look to class B or C product as the alternative solution. Since the majority of the infill industrial product is old and functionally obsolete, in order for users to operate in them, modifications need to be made to the building to improve the operational efficiency.

GlobeSt.com: How will this affect rental rates in 2017?

Dimola: We expect 2017 to be a year of strong industrial real estate performance. Rental rates in 2017 will continue to increase due to the shrinking vacancy and supply-demand imbalance. So many users have been actively in the market for so long, that there will be a point where they've managed to employ their real estate and supply chain decisions and in return demand will slow.

GlobeSt.com: What types of tenants are winning lease deals in this market?

Dimola: The L.A. industrial tenant mix is quite diverse with companies in the 3PL, clothing, furniture, food, packaging, and manufacturing businesses. From a Landlord's perspective, a tenant's overall credit worthiness plays an important role in determining their best fit. That being said, companies with stronger credit and financial stability are winning the lease deals in LA.