In urban centers where space is scarce and competition is fierce, infill development can help close the gap and provide space and facilitate services to the community. At I.CON: Trends and Forecasts, speakers will provide insights into how to compete in these infill markets, creative ways to add value to existing buildings, and lessons learned to help avoid common pitfalls associated with infill development and re-positioning. Bisnow connected with CapRock Partners President Jon Pharris, a panelist for the session on infill markets, and Caprock Partners’ Taylor Arnett, I.CON Planning Committee member, about industrial product availability, demand and rental rates.
On the West Coast, a growing population base and direct access to the U.S.’ largest ports has helped fuel an already booming industrial market. In popular markets like Los Angeles, Oakland and the Inland Empire, land availability has decreased as demand continues to outstrip supply.
U.S. West Coast ports increased their market share by weight from 39.4% in 2015 to 40.2% in 2016. Third-party logistics companies have clustered around these centers to take advantage of the heavier flow of goods. While these companies represent the largest share of leasing activity in the warehouse and distribution arena, 24% according to JLL, the market continues to attract a wide range of players.
“When you get some of these big buildings and look at it on the basis of square footage, the drivers of the biggest developments are going to be the big-box companies,” CapRock Partners president Jon Pharris said.
Finding space to accommodate those big-box companies at a reasonable price has become a challenge. In the saturated Southern California market, infill conditions and high barriers to entry are common, and large land parcels are rare. Closer to urban centers, former industrial land is being converted to mixed-use, lowering inventory and pushing up prices.
“There is less industrial product available because it's being converted into multifamily, office or mixed-use. Even if demand was the same, there would be an increase in rental rates due to the reduction in leasable space. However, given the reduction in inventory coupled with the increased demand for space, there is nearly unprecedented upward pressure on rental rates,” Pharris said.
Rent for industrial space in the Inland Empire has grown 50% since 2010 to $0.51/SF, despite inventory increasing 20%.
Read the full article on Bisnow, and register today for I.CON: Trends and Forecasts, June 8-9 in Long Beach, California, the critical conference for the industrial real estate sector and your opportunity to network and share strategies with top industrial leaders from across North America.
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About NAIOP: NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial, retail and mixed-use real estate. NAIOP comprises 18,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit www.naiop.org.