Economic fundamentals continued to strengthen at the outset of 2017 in the Central Valley region of California. The combined Modesto and Stockton-Lodi MSAs saw a modest year-over-year uptick in non-farm payroll positions to the tune of +2.0% bringing the total to approximately 401,000 jobs, up from the previous figure of 393,000. Accordingly, unemployment decreased -60 basis points (BPS) over this time period rounding out the first quarter at 7.8%, compared to 8.4%. We anticipate this number will continue to edge down in the foreseeable future with more migrating to the region.
Vacancy in the Central Valley industrial market, which includes San Joaquin and Stanislaus Counties, remained extremely low at the outset of 2017, ending the first quarter at just 3.7%. This represents a slight uptick of +30 BPS compared to 3.4% the end of 2016; however, it marks a significant decrease from 5.8% one year ago. In particular, 3.0% warehouse sector vacancy rate reflects notable space constraints. Demand has been strongest over the past several years for this product type, a trend that shows no sign of relenting. While the Central Valley continues to experience persistently high demand levels, there is now a limited amount of activity that can possibly occur in existing product. Thus, after several consecutive years of staggeringly high space absorption figures, net absorption was very modestly positive during the first quarter of 2017. Going forward, we anticipate positive absorption figures in 2017 with absorption to largely occur by necessity in the leasing of newly developed space as there is very little to absorb in existing product.
Source : Cushman & Wakefield