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The future of manufacturing in California

California ranked #1 in United States for manufacturing output

Recent legislation and technological evolution have sparked a renaissance within the manufacturing sector in California. It’s now ranked first in the United States for manufacturing jobs, numbers of firms and gross output—accounting for 11.4 percent of the total U.S. output in 2013.

California’s prominence as a global hub for manufacturing is often underestimated. Below, see details on the state’s seven well-defined geographic clusters specializing in all areas of manufacturing output. And for further information, download our complete report on the future of manufacturing in California.

Far North

The timber industry and its related products have historically been the Far North’s economic base. Years of decline in this industry have prompted this area to attempt to diversify their economy, though manufacturing remains relatively less important to this region than others in California.


Demand continues to be minimal in the Far North of California. The local economy has lagged the rest of California, and the area has not historically been a major industrial center owing to the contraction of the timber industry in the region. A declining labor force has eroded the local consumer base, while the economy remains dampened with a stubbornly high unemployment of eight percent. Conditions have slowly improved from the peak of unemployment in 2010 of 17 percent. Slow industrial growth could return if the economy continues to stabilize.


Sacramento sits on the original terminus of the first transcontinental railroad, making it an important distribution and processing center for food products grown in the Central Valley bound for markets east. Manufacturing for the transportation and logistics such as building railcars still plays an important role in the Greater Sacramento Area today.


Vacancy rates declined year-over-year across the majority of Sacramento’s submarkets, indicating that businesses are expanding alongside the improving regional economy. Larger occupiers face an increasingly competitive leasing environment with few existing modern distribution facilities available along desirable transportation corridors. Demand for Class A distribution and light industrial space pushed overall vacancies below 10 percent. With limited new construction in the pipeline, vacancy rates will continue to compress in both primary and secondary submarkets leading to a sustained period of rent growth in the quarters to come.

Central Valley

The Central Valley is the agricultural heart of California and one of the most productive agricultural areas in the world. Processing agricultural produce is a major staple for manufacturing in the Central Valley, though the Tracy and Stockton Area has become increasingly tied to the San Francisco Bay Area as a manufacturing and distribution point.


As the hub for distribution in Northern California, the Central Valley stands to benefit from requirements tied to the growing regional economy. Overall vacancy declined for the ninth consecutive quarter to 6.9 percent, the lowest recorded vacancy in over eight years. Large blocks of space are in short supply leaving tenants few alternatives to choose from. New supply is on the horizon for tenants seeking modern bulk-distribution and warehouse space. As these projects deliver, we expect to see lease rates hike to meet underwriting assumptions for these modern distribution facilities and bring rates back in line with pre-recession peak pricing.

North Bay

The North Bay is the home of Napa Valley, one of the most famous wine-making regions in the United States. Due to restrictions on development in the North Bay, agricultural production and wine-making continue to be the major driver for the North Bay’s manufacturing sector.


With nearly 2 million square feet of new development expected over the next 12-18 months, tenants can expect some reprieve and increased availability of suitable relocation and expansion options over the near-term. Vacancy sits at historic single-digit lows while rental rates are eclipsing pre-recession highs. The rapid recovery of the wine industry and organic growth of other industries in the region have been key drivers for the Napa and Solano county industrial market in recent quarters. Developers have already responded to growing demand and are coming on line with new speculative developments over the coming quarters.

East Bay

The East Bay is the historical center of industrial activity in Northern California, anchored today by the Port of Oakland, the fifth busiest container port in the United States. It has a diverse manufacturing sector and is a major distribution point for the Western United States.


Developers are ramping up on new development projects at the fastest pace in nearly 20 years. Over 25 percent of projects under construction are pre-leased, yet demand for modern distribution facilities still outpaces supply on hand. Vacancy rates have surpassed pre-recession lows; asking rents are trailing contract rates indicating that market demand will set the precedent for future rate increases.

South Bay

The South Bay is the home of Silicon Valley, the birthplace of the computer age and epicenter for high-tech manufacturing for the globe. High-tech manufacturing stemming from the original semiconductor manufacturers of the late 20th century continues to dominate manufacturing in the South Bay.


The Epicenter for high-tech manufacturing and R&D is shifting north along the 880 corridor toward Fremont and Newark. Competition for available space favors office and tech tenants that pay higher rents; and with few development projects in the pipeline, industrial tenants must be willing to relocate north if they want to stay in the bay area. Growing demand across the board from both office and R&D users is changing the landscape of the traditional industrial market and creating a hub for manufacturing and innovation.

Los Angeles

Aerospace has been a major staple of the Los Angeles Area manufacturing sector, though the manufacturing sector is diverse with many producers taking advantage of access to the Port of Los Angeles and Long Beach. These ports together make up the busiest container port on the West Coast of the U.S.


The Los Angeles basin is experiencing positive dynamics across all submarkets. Demand on a lease and purchase basis continues to strengthen, building on a trend we saw accelerate through year end 2014. Low fuel costs and global economic strength, apart from Europe, are setting the stage for stronger fundamentals. Rental rates and sale prices are rising and expectation is to exceed peak pricing imminently.

San Diego

Military, Defense, and Biotechnology are the major sectors of manufacturing in San Diego. Supplies for defense contractors and local naval bases have historically been most important, though the biotechnology and medical device manufacturing is growing in importance.


San Diego’s economy continued its steady recovery, which has contributed to the growth in the industrial market. This demand was driven mostly by warehouse and distribution space, which accounted for over 60 percent of the absorption this year. Industrial rents have begun to see more substantial increases. Moving in to the New Year, the supply-constrained conditions and continued demand for space will contribute to additional rent growth with rents starting to approach pre-recession highs. Biotechnology and life sciences firms will continue to expand and drive demand for space. The on-going growth in manufacturing and construction will also contribute to demand.

Questions? Contact us:

Greg Matter

Head of JLL’s Advanced Manufacturing Group
Tel +1 650 480 2220
Cell +1 650 622 2362
CA DRE #: 01380731

Elliot Williams

Research Manager - Norcal Industrial
Tel +1 916 491 4322
Cell +1 916 217 1606
CA DRE #: 01914636