Mid-Year Review: Industrial Real Estate Predictions for 2024

Industrial real estate in Southern California is facing an interesting year ahead, with predictions of softening lease rates and increased sales volume. As we reach the halfway point of 2024, it’s time to reflect on the forecasts made earlier this year and see how they are playing out.

One of the key predictions made was that industrial lease rates would soften due to an excess of inventory in the market. This prediction seems to be coming true, as owners are offering more concessions to attract tenants, such as free rent and enhanced brokerage fees. This trend is expected to continue until all Class A inventory above 100,000 square feet is absorbed.

In terms of sales volume, there is a growing trend of owners choosing to sell their vacancies rather than waiting for tenants. This is particularly true in the inland areas of Southern California, where institutional owners are looking to redeploy their money into markets with better fundamentals.

Despite global uncertainty and potential inflationary pressures, the prediction of avoiding a recession so far seems to be holding true. The economy is performing well, with low unemployment rates and the possibility of interest rate cuts later in the year.

Speaking of interest rates, the prediction of falling rates seems to be on track, with the 10-year T note hovering around 4.2 to 4.3%. This is good news for borrowers but not so great for savers, as commercial real estate continues to be viewed as a safe haven for investment.

As we move into the second half of 2024, it will be interesting to see how these predictions continue to unfold. With the industrial real estate market in Southern California facing challenges and opportunities, it’s important for owners and occupants to stay informed and adapt to the changing landscape.