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Regional industrial real estate market is improving, USC forecast says

Southern California’s office market will be depressed as long as unemployment levels remain high, but demand for local industrial buildings is strong and growing modestly, a new report says.

A 17% increase in port traffic over last year will help stabilize –- and in some areas increase –- industrial rents in the region, according to the annual Casden Forecast released Tuesday by the USC Lusk Center for Real Estate.Downtown skyline

“The industrial sector is showing stronger signs of recovery across the board,” said Tracey Selsen, a coauthor of the forecast. “The strong Chinese and Indian economies, combined with the weakened U.S. dollar, have increased demand for U.S. manufactured goods and greatly increased port traffic.”

Los Angeles is one of the tightest industrial markets in the country, with a 3.3% vacancy rate. Rents are expected to rise 10.5% in the next two years.

Meanwhile, Los Angeles office landlords can expect to see vacancy rise and rents fall as pared-down companies occupy less space than they have in the past. The local office market won’t stabilize until 2012.

The report, which analyzes data through the third quarter of 2010, shows a modest recovery in Southern California over last year. However, a modest recovery remains disappointing in the aftermath of the worst year for the economy in nearly 70 years. The best that could be said, according to the report, is that the economy stopped getting worse.

-- Roger Vincent

Photo:  Downtown Los Angeles offices.  Credit: Los Angeles Times

 
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