Industrial Study Highlights Market Realities

LOS ANGELES-Grubb & Ellis Co. has produced a new study of the Los Angeles County industrial market that goes beyond the regular quarterly surveys issued by major brokerage firms in order to provide building owners with data on how the county’s roughly one-billion-square-foot industrial market has changed with the economic downturn and how building owners can best adjust to those changes. Chuck Hunt, L.A. Metro executive managing director and area manager for Grubb & Ellis, tells GlobeSt.com that new report originated when the company and its researchers concluded that it was important for building owners to understand the depth and breadth of the changes in the L.A. industrial market in order to make better decisions in the management and leasing of their properties.

One of the salient points of the report, which was produced by Grubb & Ellis researchers led by J.C. Casillas, is that leases are taking significantly longer to close. The study shows, for example, that a comparison of completed transactions in the first half 2008 versus the first half 2009 “reveals an increase in time needed to close, and in some space sizes, it is taking up to two months longer.” This is “well beyond the historic lease-up time,” according to the survey.

In addition, Hunt points out, demand for industrial space has fallen substantially, meaning that fewer prospective tenants are in the market for the space that is on the market. What this means for landlords, he says, is that they need to aggressively go after any prospective tenant who is looking at their space because the next potential tenant might not come along for quite some time.

Building owners enjoyed much more favorable conditions a few years ago, when they could be choosier. They knew that if they didn’t do a deal with a tenant who was looking at their building, someone else would come along shortly to lease the space. “That has completely reversed itself,” Hunt says. Nowadays, tenants know that there is a lot of space available and that spaces have been on the market for a long time, so they are being very aggressive in their lease negotiations, he says.