UPDATE: Southern California has just been confirmed as the most expensive region in the U.S. for warehouse rents, with Orange County leading the nation at an astonishing average of $17.09 per square foot, a significant 7% increase over the past year. This surge in costs is causing a ripple effect throughout the local economy and raising questions about the future of industrial leasing in the area.
The latest data from Commercial Cafe, released in September 2023, highlights this alarming trend, showing that new leases are averaging a staggering $19 per square foot in Orange County alone. Nearby, Los Angeles follows closely with average rents of $15.59 per square foot, reflecting a 5% rise year-over-year. The implications of these soaring prices are felt across the region, especially as the demand for warehouse space remains intense.
Inland Empire also remains competitive, boasting rents at $11.65 per square foot, up 8% from last year, making it the seventh highest in the nation. New leases in this area average $14.58 per square foot. This affordability compared to Orange County and Los Angeles has turned the Inland Empire into a hotspot for warehouses, further intensifying the local industrial market.
As Southern California continues to grapple with these escalating costs, the vacancy rates remain surprisingly low. The Inland Empire reports a vacancy rate of just 7.7%, the eighth lowest among major U.S. markets. Orange County and Los Angeles aren’t far behind with rates of 8.2% and 8.3%, respectively. All these figures fall below the national average vacancy rate of 9.5%, showcasing just how competitive the market is.
The significance of these developments cannot be understated. Southern California’s warehouses play a crucial role in managing the flow of goods through the Los Angeles/Long Beach ports, one of the largest shipping hubs globally. The region’s logistical demands continue to outweigh the high costs, resulting in a scarcity of available warehouse space.
Additionally, the rising rents are translating into steep selling prices for industrial properties. In the first nine months of 2023, Orange County industrial properties sold for an average of $306 per square foot, making it the second-highest in the nation, trailing only Detroit at $624. Los Angeles follows in third at $282 per square foot, while the Inland Empire stands at $234 per square foot, marking it as the sixth highest.
As the industrial real estate market evolves, industry experts are closely watching how these trends will influence local businesses and logistics operations. The soaring costs of doing business in Southern California raise critical questions for tenants and investors alike.
Stay tuned for more updates as this story develops and we continue to track the impact of these record-high warehouse rents on the Southern California economy.
