Investigate California real estate market’s performance in the fourth quarter of 2016 with Voit Real Estate Services’s indispensable Q4 2016 market reports.
Be On the Look-Out
Fans of crime drama novels and television shows are familiar with the BOLO, the order to “be on the look-out” for a bad guy on the run.
Metaphorically speaking, we think that acronym is appropriate to the Orange County industrial market, as well.
Vacancy is so low and the availability of quality buildings so thin that business owners must constantly “be on the look-out” for a facility that will fit their needs, even if they have years remaining on a lease. Landlords and their tenants are renewing leases years in advance, tenants are leasing more space than they need or cobbling together multiple spaces just to make sure they have a roof over their heads.
With vacancy flat-lined at 2% in both Orange and Los Angeles Counties, with virtually no new inventory being built, it’s clear why such actions have become necessary.
Q4 market metrics point to a 2017 that is likely to look a lot like 2016.
Demand is still running ahead of short supply, and our local economy is fundamentally strong.
So, the risk of significantly higher vacancy or a stall in rent growth is unlikely. However, mortgage lenders have already pushed long term rates higher, and with the Fed finally showing the courage to reverse its monetary stimulus stance, we see rates moving even higher. That will raise occupancy costs for owner/users and potentially slow the rate of price appreciation.
After several years of double-digit price increases, that may actually be a good thing, as many look at the sale market, which has been driven by cheap money, as overheated. If sale demand is impacted, growth in rents could accelerate as would-be buyers compete for the meager supply of good lease product.
Expectations for an economic boost from the new Trump administration have been high. Talk of tax cuts, infrastructure spending and regulatory relief have fueled optimism, but converting political rhetoric into meaningful legislation is complex and time-consuming.
So we remain focused on our own market fundamentals as our primary guide, while keeping a watchful and hopeful eye on what goes on in Washington.
Real estate decision-making in Orange and Los Angeles Counties will remain driven by scarcity going forward.
Both markets have reached infill status, which has driven land prices so high that traditional industrial development may not be possible going forward. That means that users are left to choose from an aging industrial base that becomes more functionally obsolete every year.
So, “be on the look-out” at all times and be ready to make adjustments to your real estate strategy as opportunities arise. We stand ready to assist you in that effort. Just give us a call.
ORANGE COUNTY – INDUSTRIAL
This in-depth market report rounds up the performance of the Orange County industrial markets in the fourth quarter of 2016.
MID-COUNTIES – INDUSTRIAL
Download our fully-illustrated and graphed Q4 2016 report for the mid-counties industrial market via the button below.
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