TEMECULA, CA
Flat Values, Slower Absorption
T
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e Temecula industrial sub market experienced negative absorption of (11,020) square feet during the 1st Quarter of 2015. Net absorption YTD was negative at (1,076) square feet. The total market vacancy rate was 4.8% during the 1st Quarter of 2015 and was the fifth consecutive quarter of citywide vacancy below 5%.
Va
cancy rates in multi-tenant segments varied, but the overall multi-tenant vacancy rate increased slightly to 12.2%. Rental rates on multi-tenant suites maintained their average of $0.70 per square foot, on a Modified Gross basis.
There were five (5) sales of industrial properties during the 1st Quarter of 2015. As a result of strong market fundamentals, average prices remained steady at an average of $100.00 per square foot for industrial facilities in Temecula. The city's unemployment rate decreased from the prior quarter to +/- 5.1%.
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MURRIETA, CA
Slightly Slower, Rising Property Values
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ust
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al sub market
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en
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ed
negative absorption of 49,910 square feet
d
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ing the 1st Quarter of 2015, a decline from t
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ed
YTD positive Net Absorption of 30,988 square feet
.
The total vacancy rate in the 1st Quarter increased slightly to 3.0%. Multi-tenant vacancy rates increased by nearly two percentage points from the prior quarter, with a total vacancy rate of 4.2%. As a result, average multi-tenant rental rates dropped to $0.61 per square foot, on a Modified Gross basis.
There were zero (0) sales of industrial properties during the 1st quarter, 2015. We see no reason why sale prices for industrial real estate in Murrieta should not maintain their prior quarterly average of $107.00 per square foot. The city's unemployment rate increased slightly to +/- 5.7%.
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LAKE ELSINORE, CA
Positive Absorption, Low Vacancy
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positive absorption of 27,870 square feet
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ing the 1st
Q
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2
015, with
positive YTD Net Absorption of 71,985 square feet.
With increased absorption and no new construction underway, the total vacancy rate declined to 1.8%, decreasing significantly from the prior quarter. Multi-tenant segments of the market continued their trend toward lower vacancy rates, with a total multi-tenant vacancy rate of 3.7%. Average rental rates were $0.64 per square foot, on a Modified Gross basis.
There was one (1) sale of industrial property completed during the 1st Quarter of 2015. Pricing in the city remained steady at an average value of $85.00 per square foot for industrial sales. The city's unemployment rate decreased to +/- 7.7%.
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2015 MARKET SUMMARY
Excellent Market Fundamentals, Off to a Good Start
The local commercial industrial real estate market performed extremely well throughout the first quarter of 2015. Industrial market fundamentals remain very strong, putting upward pressure on property values. During the 1st quarter, the local market experienced a firming in both rental rates and property values. Historically low vacancy rates continue to lay the groundwork for sustainable increases in rental rates across the submarket. Average property values for industrial buildings located within both Temecula and Murrieta maintained prior year gains, with values converging across the submarket towards $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 begin to 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 was essentially flat 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 1st Quarter 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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