If you’re looking for available warehouse space in California this year, you might find a lot more “No Vacancy” signs than you were used to seeing in previous years. And if you do get lucky and find available space, be prepared to spend a good bit more than in years past. That’s the price to pay for a recovering economy.
According to a recent study by commercial real estate services firm Cushman & Wakefield, five of the ten U.S. markets with the lowest industrial vacancy rate are in California, mostly in or near the San Francisco or Los Angeles areas.
Nationwide, overall vacancy rate is down to 6.6%, which is the lowest level since first-quarter 2001, during the last days of the Internet boom. In the San Francisco Peninsula area (part of which is colloquially known as Silicon Valley), the rate is 2.4%, the lowest vacancy rate in the U.S.
“The significant space absorption during the first six month of 2015, coupled with historically low supply, is driving strong rent growth in most major industrial hubs,” explains John Morris, leader of Cushman & Wakefield’s Industrial Services Group. “U.S. warehouse rents, at a weighted average of $5.17 per square foot, are up 3.7% year-over-year. They are projected to grow 5$ by year-end and by more than 10% over the next three years.”
If you’re willing to locate your warehouse a bit outside of Los Angeles, your luck should improve significantly as the Inland Empire region of Southern California leads the nation in new development, with 18.8 million square feet currently under construction. Other areas rapidly expanding their warehouse footprint include Atlanta (17.4 million sq. ft. under construction) and Dallas/Fort Worth (13.1 million sq. ft.).
This slideshow offers a look at the 10 U.S. markets with the lowest vacancy rates, as of the second quarter of 2015.