Market trends, leading or lagging indicators. As it relates to industrial property.
The real property tax rate in Los Angeles, California is among the lowest rates in the United States. See illustration below. The low property tax rate does factor into the high demand for property and real estate development.
2010, 2011 and 2012 will be difficult years with a significant number of commercial mortgages reaching the end of their five-year lifespans, but another set is coming due in 2015, 2016 and 2017.
About $185 billion of the $600 billion in commercial mortgage-backed loans issued between 2005 and 2007 are scheduled to mature between 2010 and 2012. It’s not only CMBS that market watchers should be worried about, because $1 trillion worth of commercial mortgage maturities will occur by 2012, including CMBS, bank loans and insurance company loans.
There are many hungry buyers sitting on the sidelines with cash ready to pounce. A limited number of them have been able to find bargains, but most of coming commercial real estate defaults will occur in Office and Retail, with Industrial markets holding better ground. The Central Los Angeles Industrial market has witnessed very few CMBS defaults at this time.
The Los Angeles MSA (LA-Riverside-OC) Consumer Price Index inched up by +0.1% in April following no change in overall prices in March. Over the past year, prices in the region have declined by -1.3%. The chief culprit was falling transportation prices which were primarily driven by plunging energy prices, down by -32.1% since April of last year. On the other hand, core CPI (less food and energy) prices increased by +1.5% during the same period. [Note: local consumer price index data are not seasonally adjusted]
The above data is used to calculate the annual rent increases on a typical lease. Many rent adjustment clauses allow for annual increases to fall within a range, such as 3-6% per annum. Right now, the annual rate of change is zero according to the above data.