Along with the positive absorption, availability of all product types has gone down 40% for the year; with the availability rate declining in the fourth quarter to 4.91%, a record quarterly low for the county. Additionally, Voit Commerical Brokerage's 4th Quarter 2000 Industrial Survey showed a decrease in availability across all submarkets of the county for three consecutive quarters, says Jerry Holdner, VP of market Research for Voit and author of the survey.
The county's inventory between the fourth quarter 2000 and the same quarter a year earlier grew 9.5 million sf--twice as much new inventory as in the office sector--for a modest 3.6% increase. Product under construction dropped by 55% in the fourth quarter from 3.6 million sf in the last quarter of 1999 to 1.6 million sf at year's end 2000. Planned construction was up 28% for the year
"That has to do with interest rates," says Holdner. "There's still a lot of product planned--more than a year ago. [Until] we get through the so-called soft landing, there will be a temporary stall. But what I'm seeing is more construction starting up with yesterday's half-point cut in the prime rate by the Federal Reserve. It's a pretty big cut."
The availability of flex product was particularly hard hit in the fourth quarter, down to 7.38% for the quarter compared with the 21.56% availability a year ago. The reason, Holdner says, is that a lot of business expansions and startups are moving into flex space, and some Class A office users are moving over to flex space as well.
The greatest existing inventory, as well as planned and product under construction is in the north county, which alone accounts for 40% of all industrial product in the county. The North county dominated the market's leasing and sales activity throughout year 2000. However, in the fourth quarter the airport area was the dominant player, mostly due to its large inventory of R&D and flex space which goes at premium prices.
Prices were also up for the year, increasing almost 15% to $0.62 per sf, and total sales and leasing activity for the county increased 12.6% overthe last quarter of 1999. The airport area had the most sales and lease activity during the fourth quarter.
As for 2001, Holdner expects prices to rise another 10% due to tighter inventory levels, placing more pressure on pricing. He believes that construction of new product will continue on infill sites, although there is still land available for building. It's just hard to come by, he says.
For a copy of the Voit report, e-mail a request to: [email protected].
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