The total vacancy rate in the 3rd Quarter decreased to 2.5%, once again establishing the city's lowest vacancy rate on record.  Vacancy rates remained flat in the multi-tenant market segments, with a total vacancy rate of 3.5%.  As a result, multi-tenant rental rates remained elevated and averaged $0.69 per square foot, on a Modified Gross basis.

There were six (6) sales of industrial properties during the 3rd quarter, 2014.  Sale prices for industrial real estate continued to rise to an  average of $105.00 per square foot.  The city's unemployment rate increased to +/- 5.90%.

The total vacancy rate was 4.2%, decreasing only marginally from the prior quarter. Multi-tenant segments of the market experienced lower vacancy rates, with a total multi-tenant vacancy rate of 5.8%.  Rental rates were flat at $0.55 per square foot, on a Modified Gross basis.

There were five (5) sales of industrial properties completed during the 3rd quarter of 2014.  Pricing in the city was down slightly to an average value of $78.00 per square foot for industrial sales.  One larger building in the market sold at a below market rate. The city's unemployment rate increased by nearly 100 basis points to +/- 8.76%.

The local commercial industrial real estate market is performing well in 2014.  Industrial market fundamentals remain very strong, putting upward pressure on property values.  During the past 12 months, the local market experienced sharp increases in both rental rates and property values.  Expect historically low vacancy rates to provide the basis for approximately 8.0% annual appreciation in rental rates by the end of 2014.  Property values for industrial buildings may achieve a median price of $100.00 per square foot by the end of 2014 across the entire region.  Also, given the limited supply of industrial facilities, land values will continue to rise as some businesses 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 increased slightly  within the region as compared with 12 months ago, suggesting a seasonal cooling of the local labor market.  As such, the commercial industrial real estate market may follow the trend in unemployment rates and cool slightly by the end of 2014.  Nonetheless, we expect appreciating property values and rental rates to continue throughout the remainder of 2014.  Overall, 2014 will be a classified as a solid year of gains for the local commercial industrial real estate market.      

Sources: Masino Industrial Consulting, Inc., Costar, California EDD