Arambulo: There is a record amount of capital chasing an extremely limited supply of industrial investment opportunities in Southern California. With major barriers to entry such as increasing construction costs, the lack of available land, and a lengthy entitlement process, new Class A building sales are breaking previous record sales prices. Additionally, well-located infill buildings, especially those with excess land, are seeing tremendous investor interest as these kinds of assets are critical to the e-commerce supply chain as last mile facilities. While the number of investment opportunities have increased from a slow start to 2017, investor demand will continue to outpace the supply of investment product for sale.

GlobeSt.com: What is your one-year outlook for the industrial market?

Arambulo: Fueled by strong port volume and consumers' growing preference for shopping online, e-commerce companies and 3PLs will continue to grow as occupiers of warehouse space. The lack of modern product and availability of land for development will continue to be an issue for future growth. New supply is not expected to apply significant upward pressure on vacancy, as we foresee healthy absorption in 2017-2018. Given the low vacancies across the region, we expect continued growth in rental rates, property values and land prices.

The industrial market is having a hot year, with industrial rents up 50% from the financial crisis and vacancy rates plummeting below 1% in some submarkets of Los Angeles. New research from Cushman & Wakefield shows that there is no end in site for this industrial growth. Rental rates are expected to continue to climb through 2018 and absorption is expected to remain strong, according to Tina Arambulo, industrial research director of the Los Angeles Basin at Cushman & Wakefield. We sat down with Arambulo to talk about the tremendous growth and her outlook for the market.

GlobeSt.com: Is there a ceiling to industrial rents?
Tina Arambulo: The record low vacancy has prompted significant rent growth and the available Class A and B product are leasing quickly at high rents. The tight market means users have relatively few alternatives. Such momentum has generated a big change in rents, which are up 50% from their lows during the financial crisis. The significant growth in rents has been fueled by tenant demand to be well located, the importance of proximity to major consumer markets and lack of new supply. For e-commerce firms in particular, industrial space needs are less about the cost of occupying the real estate and more about transportation costs. The combination of low vacancies, improving economic growth and rising land and construction costs suggests that rents will continue to rise in 2017-2018.

GlobeSt.com: We know that the activity has affected tenants. How has investment activity been affected by the growth of the market?

Arambulo: There is a record amount of capital chasing an extremely limited supply of industrial investment opportunities in Southern California. With major barriers to entry such as increasing construction costs, the lack of available land, and a lengthy entitlement process, new Class A building sales are breaking previous record sales prices. Additionally, well-located infill buildings, especially those with excess land, are seeing tremendous investor interest as these kinds of assets are critical to the e-commerce supply chain as last mile facilities. While the number of investment opportunities have increased from a slow start to 2017, investor demand will continue to outpace the supply of investment product for sale.

GlobeSt.com: What is your one-year outlook for the industrial market?

Arambulo: Fueled by strong port volume and consumers' growing preference for shopping online, e-commerce companies and 3PLs will continue to grow as occupiers of warehouse space. The lack of modern product and availability of land for development will continue to be an issue for future growth. New supply is not expected to apply significant upward pressure on vacancy, as we foresee healthy absorption in 2017-2018. Given the low vacancies across the region, we expect continued growth in rental rates, property values and land prices.