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Fear that new construction will not lease is not an issue in Central Valley

  • ​Over the last two years Central Valley has seen its development pipeline erupt with activity as developers look to take advantage of rapidly increasing rental rates, discounted land prices, and strong tenant demand from e-commerce giants, 3PL’s, and manufacturing companies. The demand has become so strong that developers are scrambling to bring new product to the market, so much so that over 9 million square feet has broken ground in the last year.
  • Typically a common fear of rapid development is product going unleased or unsold as the market becomes oversaturated. This problem does not appear to be affecting the Central Valley. New developments are becoming occupied just one quarter after delivery as exemplified by the fact that just under 12MM of the roughly 18MM s.f. under construction has been absorbed between 1Q15 and 3Q18.
  • With rental rates still rising at a rapid pace, to developers delight, and those rental rates still representing a discount compared to other Northern California markets, to tenants delight, these trends are not expected to slow down. ​​

Source: JLL Research

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