Challenges and Opportunities in Southern California Industrial Real Estate Market

The Southern California industrial real estate market is facing challenges despite its desirability, with a notable slide in rents in some areas. Developers and owners are finding it difficult to acquire properties in the region due to the scarcity of deals and intense competition.

According to Rexford Industrial Realty’s Chief Investment Officer Patrick Schlehuber, the biggest challenge is finding sellers who are willing to meet realistic price expectations. Many sellers are holding out for peak prices, making it hard for buyers to strike deals.

Ares Management’s Managing Director Gregg Boehm noted that the lack of distressed industrial properties and the reluctance of banks to foreclose on borrowers have contributed to the scarcity of deals in the market. Additionally, high capital costs and increasing regulations are adding to the challenges faced by those looking to invest in the Southern California industrial sector.

In contrast, panelists specializing in Kern County see growing opportunities to acquire land due to a pro-business climate and fewer regulatory hurdles. Agricultural landowners are now open to selling their properties for redevelopment, creating new opportunities for real estate professionals.

Despite the challenges, panelists remain bullish on the long-term prospects of port-adjacent markets like the Inland Empire. The area’s proximity to major ports and record rent growth over the past few years make it an attractive location for businesses. As rents continue to adjust, occupiers may consider returning to the LA area for their operations.

Overall, the Southern California industrial real estate market is experiencing a period of transition, with opportunities for growth and investment in emerging markets like Kern County and the Inland Empire.