The Orange and Mid-Counties regions continued to blast through the pandemic crisis in Q1 as if it wasn’t there.
While market activity was centered on the e-commerce sector in the 2nd and 3rd quarters of last year, business activity is now on the rise across a broad spectrum of industrial use types. Buyer demand has intensified due to low mortgage interest rates offered through the Small Business Administration, which is offering lower origination fees and 90 days of mortgage relief up to $9,000 per month. Supply of buildings offered for sale is still running well behind demand, and that has kept prices moving up further into record territory. Multiple offers from pre-qualified buyers, ready and able to close quickly, is now the norm in owner/user transactions, and many buildings are sold without hitting the general market.
The leasing market is just as tight and lease rates moved up again in the 1st quarter of 2021. Some of the biggest submarkets in both regions now have vacancy rates under 2%. After factoring out functionally obsolete inventory, the vacancy rate is approaching 0% in some cities. The lack of supply and the high demand for space is now running across all size ranges, as well, and without substantial construction of new inventory, the current situation will get worse for tenants and buyers before it gets better. Those truly in need of new facilities over 40,000 square feet are being forced to expand their search areas to include the Inland Empire, which has over 20 million square feet of quality industrial space in the construction queue.