And he isn't the only one noticing an increase of industrial opportunities in Southern California. Although the region is a long way from pre-crisis levels of economic health, the improved employment picture along with what some industry sources are calling a "profound turnaround" in the industrial market are signs of a recovery.

From September through the end of 2011, approximately 86,000 non-farm jobs were created in California, while job growth for the nation as a whole was approximately 414,000. Housing prices appear to have mostly stabilized. Consumption and consumer confidence are improving. Those key indicators, among others, according to industrial expert Rob Neal, are proof of an industrial market that is rebounding, with the bottom of the market left behind.

"The vacant properties in our portfolio generated significantly more interest in the month of December than in the summer of 2011," states Neal, a managing partner of Hager Pacific Properties. For example, a 65,000-square-foot renovated warehouse at 1906 Dominguez St. in Carson had been vacant since renovation completed in August. After an initial flurry of interest, it was slow in the late summer and throughout the fall. However, Neal says, in late November and the three weeks before the holidays, "we had several tours, two offers to purchase and one resurrected offer to lease."

Mid-sized buildings aren't the only ones making a comeback. The mega-box space— more than 500,000 square feet—in the Inland Empire was the first to rebound and remains the healthiest segment of the industrial real estate market in Southern California, says Neal. "The physical vacancy rate was relatively low even during the worst part of the economic crisis. Lease rates in this segment have increased approximately 25% in the last two years." In fact, there's a shortage of mega-box product and significant barriers to entry, he adds.

Jones Lang LaSalle managing director Peter McWilliams expects the supply of new big-box product to grow, especially in the Inland Empire, but it may not meet demand in 2012. If that happens, he says, "there will be a spillover into the sub-400-,000-square-foot segment, which will see vacancy fall as large occupiers are forced to take up space in multiple properties."

It's a given that the current supply will not accommodate the demand, notes Newmark Knight Frank principal Wes Hunnicutt. "There are a handful of big box industrial buildings under construction in Southern California," he says. "However, land is scarce and we anticipate further development more east, or through the redevelopment of underutilized sites."

Rents have remained relatively flat in the Inland Empire over the past seven quarters despite healthy net absorption levels. But the supply/demand equation in this market has hit a tipping point that will drive rents upwards in coming quarters, predicts JLL's McWilliams. "This top-down rental recovery will be felt predominantly in properties greater than 300,000 square feet as abundant available stock will continue to weigh down rents in smaller properties," he says.

Bryan Shaffer, a VP in the Los Angeles office of George Smith Partners, points out that 2012 will see a clear demand not just for big-box space in general, but particularly for well-located, modern big-box space. "The older projects often slow down the logistic process," he observes, "so they are of interest only if other options in the market are limited." One particular issue he observed in one of the former projects he managed is that larger trucks could no longer make the turn into the rear driveway, therefore limiting access. "As trucks carry larger shipments, old projects just don't work as well."

He adds that these "outdated facilities" will likely see slow leasing activity in 2012. "In the next few years, larger ships will be able to cross the Panama Canal, so the ability to accept larger shipments at projects will be a key factor." Shaffer also believes that as consumer demand for retail goods remains positive, and as online retailers— like Amazon, for example—continue to expand, the need for mega-space will grow.

"It's a distribution-oriented market," explains Hager's Neal. "Occupants of property desire the standard features of a distribution building, including high clear height, functional loading and excess land for container storage," he says. "If your building doesn't have state-of-the-art attributes, the rental rate will be impacted accordingly."

Because of the shortage of supply, however, Neal believes that almost every building will eventually be absorbed if priced correctly. Like Shaffer, he feels that there will be a strong increase in industrial development in 2012—but only for big boxes. "We're seeing very little development for smaller buildings and for properties in other markets."

Those expected developments are not considered speculative since "developers know that there are several competing requirements that demonstrate a stated interest or commitment in the development before construction commences," says Neal. "If a big box can be entitled, it makes a lot of sense to start it now."

On the capital markets side, there is a strong interest in industrial properties from a variety of different lenders for projects that make sense, says Shaffer. "We're seeing lower loan-to-value construction loans with high net worth requirements, but we've also seen some interest in our capital sources providing mezzanine financing behind the construction loan, as well as interest from equity capital."

Robert Socci, an EVP in Voit Real Estate Services' Anaheim office, says both buyers and investors have been aggressive, "knowing the window of opportunity is closing."

There's certainly investor appetite for quality product "and a much greater institutional demand for product leased by quality tenants," explains Newmark's Hunnicutt. "Many of these projects include spec buildings without a tenant in tow. We've also witnessed interest from institutional buyers for larger big-box buildings that do not contain a long-term lease. Buyers are betting the market will improve, along with rates."

With greater demand comes higher rates, and some tenants—who are confident in their space requirements and want to go long on term—are locking in, states Socci. "Well-capitalized, sophisticated, large companies are making moves right now as they're in the position to make longer-term decisions," he says. "Currently, rents are low and buildings are selling below replacement cost. Smaller businesses are still struggling and have been slower to gain positive momentum."

Barry Saywitz, president of the Newport Beach, CA-based Saywitz Co., says "sophisticated tenants have been taking advantage of the market to lock in at low rental rates." While the practice is common among larger, more stable corporations who foresee a long-term presence in the marketplace, Saywitz says entrepreneurial companies that have confidence in their long-term business plans are also in on the strategy. "The concept of signing a longer-term lease—seven, 10, 12 years—as opposed to a shorter one would allow the tenant not only to have greater negotiating leverage in up-front concessions but also to reduce their occupancy costs, locking in at today's rental rates."

Hunnicutt adds that his firm is advising many of its clients to consider longer-term leases in an effort to insulate companies from increasing costs. "In the past, we witnessed rates increase as much as 20% in a 12-month period," he says. "Companies that lock in lower rents and control facility-related costs will have an unparalleled advantage against competitors that are forced to negotiate in a much different market."

From the landlord's perspective, securing a long-term credit tenant and avoiding the risk of having to re-tenant in a soft market provides value and secures a long-term income stream, explains Saywitz. "If done properly this is a win-win situation for both landlord and tenant," he says. "We expect this trend will continue in 2012 as landlords strive to keep their occupancy levels high and as tenants continue to have a longerterm picture of their own business plan and space requirements."