Blockbuster Los Angeles industrial deal signals rebound of e-commerce leasing
Logistics firm inks 600,000-square-foot lease in City of Industry
CoStar News
December 18, 2024
An e-commerce firm has signed one of the largest industrial leases in Los Angeles in years, offering the latest sign of recovery for the property type across the country.
Distributor Win.IT America has leased the entirety of 151 Marcellin Drive, a just-built 606,480-square-foot building at Majestic Realty Co.’s 290-acre Grand Crossing South industrial park in City of Industry, an industrial hotbed in eastern Los Angeles.
The deal is among the largest industrial leases signed this year in Los Angeles, according to CoStar data. It comes at a time when national industrial leasing is on the upswing due to recent growth in key demand drivers such as U.S. imports, business inventories and real goods spending, according to CoStar research.
“We’re proud to be able to secure one of the largest lease deals the Los Angeles market has seen this year,” Majestic Realty Co. Senior Vice President Hank Darnell said in a statement to CoStar News. “We feel confident that the park will continue to attract both new and growing users for both our spec and build-to-suit opportunities.”
National net absorption is on a positive streak, with industrial tenants moving into 96.2 million more square feet than they have vacated in the past year, according to CoStar data. Rents are up by 2.4% year-over-year thanks in part to restrained development, with the amount of new industrial space under construction down by 33% in the past year, according to CoStar research.
These healthier fundamentals have drawn investor interest, with industrial sales topping $45 billion in the first 10 months of the year, setting up 2024 to finish above the $60 billion exchanged last year.
Flight to quality
The deal is the second lease the Shanghai-based company has signed at the Majestic Realty project in the past two years. Win.IT signed a lease last year for a separate 240,500-square-foot building at the park.
The firm, which helps run supply chains for e-commerce operators, previously occupied about 300,000 square feet at another City of Industry property, the 1987-era Bristol Industry Center, according to CoStar data.
The Grand Crossing South project counts six buildings, with the first building opening in 2021 and the just-leased building delivering earlier this year. Just one building — the 694,000-square-foot sixth building — remains vacant.
The project’s “best-in-class amenities,” including an adjacent 400,000-square-foot retail center, have been a selling point for potential tenants, Darnell said in a statement.
Tenants are prioritizing new, more high-end spaces across the product type spectrum. Newer industrial facilities are tempting occupiers away from older properties with promises of upgraded space, higher ceilings, more power and other technology needed for modern distribution, according to a CBRE research report.
A flight to quality has been a major driver of robust industrial leasing activity across the U.S. that will reach 800 million square feet in 2024, the third-highest annual amount on record, according to the firm.
Downsized demand
Locally based Majestic Realty has been busy marketing more new space that’s slated to come online at the 3.3 million-square-foot park. The project, at 21921-21931 Industry Way, has five additional sites for future development.
“We’re seeing continued strong interest from a wide range of users,” that are both new to the area and relocating from other locations in the market, said Darnell.
Industrial tenants in the City of Industry have downsized their real estate footprints in the past year as they have shifted their focus from growth to efficiency, often vacating older, less functional buildings, according to Ryan Patap, CoStar’s director of market research for Los Angeles. Tenants have given back 402,000 more square feet than they have leased in the past year.
At the same time, asking rents for industrial space in Los Angeles have fallen more than 16% from recent peaks due to rising vacancy. Across Los Angeles, new industrial construction is down by 18% this year, according to CoStar data. Of the nearly 10 million square feet of space completed since 2023, 40% remains vacant.
Though imports to Southern California’s twin ports remain below peak levels reached in 2021 to 2022, they’ve been on the upswing. Nine months into 2024, the Port of Los Angeles was 18% ahead of its 2023 pace for processing cargo.
“Tenant demand could improve into 2025 due to a rise in e-commerce sales growth, further rebound in imports to Southern California, and tamer inflation,” Patap said.
For the record
Cushman & Wakefield Executive Managing Directors Robin Dodson and Chris Tolles represented Win.IT in its lease.
