Jerry Holdner, VP of market research for Voit, cites lack of available land and higher land prices for the downturn in construction levels, although 400,000 sf more new product is currently in the pipeline than there was at the end of the previous quarter, he adds. Currently, two million sf of space of industrial space is under construction, with another 7.4 million sf planned.
"Land prices are higher now because users are willing to pay more than the developers," Holdner explains. "People who own the land are now looking to sell to the users who will hire a developer to build."
Coming off a record year when 8.3 million sf was absorbed, the first quarter showed a negative absorption of 338,122 sf of industrial product. Holdner attributes the reversal in part to the one million sf of space thrown back onto the market after Albertson's grocery sold its distribution center in the north county. Still, activity was stronger this past quarter than it was for the same period a year ago.
"We had 10% more activity. We sold and leased 5.5 million sf of space as opposed to five million sf for the first quarter of 2000," Holdner says. "Even though more space came on the market, at least it's still moving."
The north county continues to be the submarket with the majority (more than 40%) of industrial product, accounting for 109 million sf of rentable space in 2,959 buildings out of a total of 266.3 million sf of rentable space in 7,683 buildings countywide. With no flex space and little R&D in the area, the area is mainly a haven for manufacturing and distribution centers. Additionally, more square footage was sold in the north county than leased, compared to the rest of the county where the opposite is true.
Overall, availability rose in the airport and north county areas and decreased in the south and west county areas. For the county as a whole, availability rose by a quarter to 5.6%, an increase of 0.7% from the county's historic low of 4.9% in the previous quarter. However, this is still 25% below the county's historic high of 7.5% availability a year ago.
Four million sf of space is planned in the north county and 1.5 million sf in the airport area. North county also has the most space under construction with 824,437 sf, followed by the west county where 546,144 sf is under construction.
Prices for manufacturing and distribution space remained flat from the fourth quarter of 2000 at $0.62 on average triple net. This was a 15% increase from the $0.54 average triple net a year ago.
As for the size of space being absorbed, Holdner's numbers show the most popular properties are 10,000 sf to 20,000 sf and 20,000 sf to 30,000 sf, as well as some big boxes of 200,000 sf to 300,000 sf. The popularity of the smaller-sized properties he attributes to entrepreneurial nature of the county with start-up companies that take smaller space to begin with and then move up later as the company grows.
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