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LOS ANGELES—Maybe it's a case of too much of a good thing, although you'd be hard pressed to convince brokers of that. As it is in markets throughout the country, industrial in Los Angeles is blooming in the bright light of the upcycle.

According to Matt Nelson, regional director of GlobeSt.com Thought Leader Xceligent, "To date the South Bay and MidCounties submarkets—the two most active in L.A. County—have 1.7 million square feet each of net absorption." Rents throughout the MSA are climbing, he adds, and there's currently some 6.6 million square feet of construction in the pipeline. All good news, and that momentum is expected to continue through the next year and a half.

But Tim Hayes, executive director of AIR, a commercial real estate association serving SoCal and for the past 15 years an Xceligent data partner, says that this growth will bring some challenging side effects, including the availability of both product and land. "The challenge is that there's a lot of money in the market that would like to be active here," he says. "But the vacancy rate, especially on the industrial side, across every market is incredibly low—we're looking at 1 or 2%."

In fact, according to Xceligent's most recent L.A. Industrial Market Report, the highest vacancy rate posted among L.A.'s five submarkets (MidCounties, L.A. Central, East, Northwest and South) this year was in MidCounties, which posted 2.4% in Q1. That has since shrunk to 1.2%, just a few basis points above the lowest this year—L.A. East's current 0.9% (see chart). So while investors are clamoring to put their money there, fewer owners are ready to sell, choosing instead to enjoy the upside.

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Developers as well will be challenged to find space in an increasingly tight L.A. marketplace. "There's simply no land to be had for industrial development," he says. "And if you can find some, there's such a price premium on it that it's difficult to get it to pencil out."

While investors and developers scramble to get a piece of that upside, users of virtually all stripes continue to sign leases for whatever space they can in the dwindling inventory. The top five deals for the past quarter, according to Hayes, are:

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• WestRock's newly signed 374,370-foot lease at 2100 Yates Ave. in Montebello (C&W & Colliers worked the deal);
• Toll Global's new 293,800-square-foot deal at 2000 E. Carson St. in Carson (Watson Land and LAREM negotiated);
• Lagunitas Brewing's new 254,840 feet in two still-unfinished buildings at 1209-1223 W. 10th St. in Azusa (JLL did the deal);
• Noble House Home Furnishings' 234,600-square foot lease at 601 W. Carob St. in Compton (CBRE and Voit negotiated); and
• Giant Bicycle's deal for 203,510 feet at 15500 Phoebe Ave. in La Mirada (Inco and JLL represented).

Taking into full consideration the challenges that are appearing on the horizon, both Hayes and Nelson remain optimistic for the mid-term. "At least for the next 18 to 24 months, everyone feels pretty bullish," says Nelson. "But it can turn around quickly. So who knows? It depends on what the banks do or don't do, and what the feds do or don't do. But right now it's as hot a market as I've seen in my career."