Ports Scramble to Unload Cargo Containers Headed to Warehouses

Vacant warehouse space in the Los Angeles County remained extremely scarce as the ports of Los Angeles and Long Beach scramble to unload ship cargo containers headed to warehouses throughout the region. A year after the pandemic shutdown began, demand for warehouses kept soaring, with rents rising and developers rushing to add new projects to meet demand.

Industrial space under construction increased 15.5 percent from the prior quarter to more than 4.8 million square feet this quarter, according to a report by NAI Capital. Since the start of the year, more than 3 million square feet of industrial space has been completed.

Vacant industrial space decreased 44.7 percent this quarter from third quarter 2020, while the average asking rent climbed 13 percent to $1.13 per-square-foot triple net. The vacancy rate fell to a record low of 1.6 percent, down 130 bps points from third quarter 2020, despite more than 5.1 million square feet of completed construction added to the market in the same period.

The market has absorbed more than 16 million square feet since third quarter 2020 as construction struggled to keep pace. Space under construction is down 8.6 percent during the same time, says the NAI report.

Demand for last mile warehouse/distribution buildings continued to be driven by e-commerce, pushing construction and constrains on land availability. Still, development persisted with warehouses getting leased before completion. A 528,710-square-foot warehouse in the San Gabriel Valley, the largest project under construction, recently leased.