Where Are Manufacturing Users Going?

In the first quarter of 2018, the industrial vacancy rate in Los Angeles managed to inch down another 10 basis points to 1.9%, and sub 1% in some popular industrial areas. Rents, of course, are continuing to surge, up 9.5% year over year to $11.59 per square foot. This isn’t shocking news, considering the industrial market has seen 10 straight quarters of falling vacancy rates and climbing rents—mostly driven by ecommerce activity. The market growth, however, does beg the question: with these high prices, where are manufacturing users going? Many of them have landed in Ventura County.

Manufacturing users, from widget markers to biotech companies, are driving the leasing activity in the Conejo Valley and its surrounding submarkets. The demand for space—generally smaller-box industrial spaces ranging from 40,000 to 100,000 square feet, which is the primary product type in the market—has brought the Conejo Valley vacancy rate down to 1% and increased lease rates and asset values. “We get a lot more manufacturing users. A lot of our tenants make widgets that fit in a shoebox, so they could have $50,000 to $100,000 of product in a shoebox,” Mike Tingus, president of Lee & Associates L.A. North/Ventura office, tells GlobeSt.com. “It is a lot of small electronic and circuit board component manufacturers, aerospace users and commercial aviation users that are driving the market out here.”

Biotech users have also recently become active in the market, and these users have been a recent driver of leasing activity, according to Tingus. Last year, biotech newcomer Atara Biotheraputics signed a lease for nine buildings at the Conejo Spectrum Business Park. “There have been several biotech tenants driving the market as well, and many of them are Amgen spinoff companies,” says Tingus. “Atara is an Amgen spinoff. People are taking early retirement from these companies, so there are 40 to 50 year-old people that are creating their own companies out here, and they need space.”

This isn’t to say there is no ecommerce presence in the Ventura market. Ecommerce users—typically distribution centers and warehouse facilities—have become ubiquitous in every market. But, it isn’t the driver of industrial leasing activity. “We have an ecommerce presence, but a majority of our tenant base in manufacturing,” says Tingus.