This freshly approved City of Los Angeles ordinance will impose a one-time 4% tax on property sale transactions above $5 million that would rise to 5.5% on transactions above $10 million. A $5-million sale would generate a $200,000 tax bill.
This will negatively impact the sellers of all property types including residential and commercial such as retail, office, apartments, and industrial.
In the WSJ article, The U.S. Is Running Out of Land, a professor of finance who studies land values cites that “Land now accounts for 47% of U.S. home values…That is up from 38% in 2012 and less than 20% in the early 1960s.”
So that intrigued me and I pulled a sample of 1,315 industrial zoned parcels from Downtown Los Angeles to the City of Vernon. See below graphic. Dividing the Los Angeles County Assessor Land Value amount by the Total Assessment results in 71% of these industrial properties’ value is the land component. The Total Assessment includes improvements such as warehouse and manufacturing buildings constructed on the land.
That is a strikingly high percentage for land value but should not be surprising given the rapid increase in prices per square foot for land sales in the last decade. In the top section of the graphic, which is the DTLA Arts District, land values have ranged from $300-450/SF in recent years. In the bottom section, City of Vernon land was not long ago $50-100/SF and is now approaching $200/SF.
The Central Los Angeles Industrial Market has been an Infill Market for many years which has resulted in rapid increases in land values. If you own land in this area feel free to contact us.
Sale Leaseback graphic
Sale-Leaseback transactions occur when a property owner sells their real estate and becomes a tenant of the property. It’s a great way for a property owner to obtain a cash infusion for capital spending for their business or to retire debt.
Sale-Leasebacks are particularly well suited to peak periods of the real estate cycle, when prices are at their peak. And prices have never risen faster or been higher in the Los Angeles industrial real estate market than now.
Feel free to contact us with any questions.