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L.A. Industrial Is Recession Proof

A new study from Ten-X shows that L.A.'s industrial market offers below-average downside risk and passes cyclical stress tests.

By Kelsi Maree Borland | Updated on October 31, 2017

The L.A. industrial market is booming—and it also may be recession proof. According to new research from Ten-X, the market passes the cyclical stress test for 2019/2020, with a prediction that vacancy rates will drop in 2021. In the nearer term, net absorption is expected to outpace out pace completions by one million square feet through 2018, bringing the vacancy rate in the greater L.A. area to 3%. To find out more about the strength of the market and why it is able to withstand a potential recession, we sat down with Matthew Schreck, quantitative strategist at Ten-X, for an interview.

GlobeSt.com: Why does L.A. industrial have lower than average downside risk?

Matthew Schreck: On the supply side, LA faces fewer supply additions than many markets, reducing the potential downside for fundamentals. Demand wise, trade flows have been picking back up throughout 2017, which is benefitting LA via the market’s port exposure and strong distribution network. Combined with the growth of e-retail and storage needs, we think this provides a solid basis for demand that would keep LA industrial fundamentals healthy even in the event of an economic downturn scenario.

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