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Extreme Industrial Growth Forecasted Through 2018

Industrial rents are up 50% from the financial crisis lows and vacancy rates have plummeted to sub 1%, and the market shows no signs of slowing down.

By Kelsi Maree Borland | kelsimareeborland | Updated on September 07, 2017

The industrial market is having a hot year, with industrial rents up 50% from the financial crisis and vacancy rates plummeting below 1% in some submarkets of Los Angeles. New research from Cushman & Wakefield shows that there is no end in site for this industrial growth. Rental rates are expected to continue to climb through 2018 and absorption is expected to remain strong, according to Tina Arambulo, industrial research director of the Los Angeles Basin at Cushman & Wakefield. We sat down with Arambulo to talk about the tremendous growth and her outlook for the market.

GlobeSt.com: Is there a ceiling to industrial rents? Tina Arambulo: The record low vacancy has prompted significant rent growth and the available Class A and B product are leasing quickly at high rents. The tight market means users have relatively few alternatives. Such momentum has generated a big change in rents, which are up 50% from their lows during the financial crisis. The significant growth in rents has been fueled by tenant demand to be well located, the importance of proximity to major consumer markets and lack of new supply. For e-commerce firms in particular, industrial space needs are less about the cost of occupying the real estate and more about transportation costs. The combination of low vacancies, improving economic growth and rising land and construction costs suggests that rents will continue to rise in 2017-2018.

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