TEMECULA, CA
Higher Property Values, Lower Vacancy
T
h
e Temecula industrial sub market experienced positive absorption of 3,025 square feet during the 2nd Quarter of 2015. Net absorption YTD was positive at 36,868 square feet. The total market vacancy rate fell to 4.3% during the 2nd Quarter of 2015 and was equal to the vacancy rate recorded nine years ago during the 2nd Quarter of 2006.
Va
cancy rates in multi-tenant segments dropped and the overall multi-tenant vacancy rate decreased slightly to 10.9%. Rental rates on multi-tenant suites increased to an average of $0.71 per square foot, on a Modified Gross basis.
There were six (6) sales of industrial properties during the 2nd Quarter of 2015. As a result of strong market fundamentals, and accounting for the sale of a single 100,000 square foot industrial building, average prices increased to $109.00 per square foot for industrial facilities in Temecula. The city's unemployment rate decreased from the prior quarter to +/- 4.6%.
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MURRIETA, CA
Higher Occupancy, Lower Inventory
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al sub market
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positive absorption of 12,512 square feet
d
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ing the 2nd Quarter of 2015, an increase from t
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YTD positive Net Absorption of 104,079 square feet
.
The total vacancy rate in the 2nd Quarter decreased slightly to 2.1%. Multi-tenant vacancy rates fell slightly from the prior quarter, with a total vacancy rate of 3.3%. As a result, average multi-tenant rental rates increased to $0.69 per square foot, on a Modified Gross basis.
There were five (5) sales of industrial properties during the 2nd quarter of 2015. Prices for industrial real estate in Murrieta increased to an average of $113.00 per square foot. The city's unemployment rate decreased slightly to +/- 5.1%.
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LAKE ELSINORE, CA
Positive Absorption, Historic Occupancy
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positive absorption of 8,368 square feet
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ing the 2nd
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of
2
015, with
positive YTD Net Absorption of 59,802 square feet.
With increased absorption and no new construction underway, the total vacancy rate declined to 0.9%, decreasing from the prior quarter and representing an all time low vacancy rate for the market. Multi-tenant segments of the market continued to trend lower, with a total multi-tenant vacancy rate of 1.8%. Average rental rates were $0.65 per square foot, on a Modified Gross basis.
There were two (2) sales of industrial properties completed during the 2nd Quarter of 2015. Pricing in the city was mixed due to both minimal data points and quality of assets sold, with an average value of $70.00 per square foot for industrial sales. The city's unemployment rate decreased to +/- 6.8%.
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2015 MARKET SUMMARY
Excellent Market Fundamentals, Primed for New Development
The local commercial industrial real estate market continues to perform extremely well in 2015. Industrial market fundamentals remain very strong, putting upward pressure on property values. During the 2nd quarter, the local market experienced a firming in both rental rates and an increase in property values. Historically low vacancy rates continue to lay the groundwork for sustainable increases in property values across the submarket. Average property values for industrial buildings located within both Temecula and Murrieta maintained prior year gains, with average values easily surpassing the 'psychological' barrier of $100.00 per square foot. Due to a limited supply of existing industrial space, several new development deliveries are in the pipeline, including the recent groundbreaking in Menifee, CA of the +/- 657,000 square foot Commerce Pointe industrial park. As such, land values will continue to rise as businesses and developers acquire land for future industrial development and business expansion.
It is our opinion that unemployment rates serve as a leading indicator of future property absorption. Regional unemployment decreased within the region as compared with 12 months ago, suggesting local labor markets will maintain prior year gains. As such, strong fundamentals coupled with a trend of increased transaction volume in the first half of 2015 suggest that activity in the local commercial industrial real estate market will continue to accelerate. Expect property values and rental rates to continue to climb throughout 2015. By all measures, 2015 will be a year of continued growth in fundamentals and signals the beginning of a new development cycle for commercial industrial projects.
Sources: Masino Industrial Consulting, Inc., Costar, California EDD
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