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.
Average Asking Lease Rates have climbed dramatically in the last several years with the largest increases in 2021 and 2022. See below chart showing the steep rise for warehouse asking rental rates in Los Angeles, Orange, Ventura and the Inland Empire per AIRCRE MLS data. These are the major industrial property markets in Southern California. Individual markets and submarkets vary along with building class quality.
Rare opportunity in the tight Southern California industrial real estate market to acquire an investment property with a long term lease with an established tenant.
This industrial building was leased on November 1, 2021 to a food production company for 10 years on a triple net NNN basis. Rent is $455,000 per year with annual increases of 3%. The company was established in 1994 and has grown since then into a few larger buildings ending up in this facility.
The building was originally constructed in 1971 and then remodeled in 2006 as a food production facility. Food improvements include refrigeration (coolers and freezers), floor drains, clarifier, food grade walls, hoods in commercial kitchen as in commissary, boiler, test lab, and other improvements to qualify for USDA and Organic food safety certifications.
Building square footage is approximately 31,326 and land square footage is 49,960 on industrial zoned land. Located near the major Los Angeles ports and LAX.
The AIR CRE is the premier multiple listing service for industrial real estate such as warehouses and manufacturing buildings in Southern California. Whether you are a buyer or tenant or landlord or seller, this MLS is the service that all the top-tier brokers primarily use. It services industrial, office, retail, and other commercial real estate listings.
There are over 33,000 listings in the system for SoCal. And there are over 1,600 members in SoCal. So if you seek to search or list for sale or lease a warehouse or other commercial property in Los Angeles, Orange, San Bernardino, Riverside or Ventura counties, contact us as we are members of this MLS.
LoopNet, which is owned by Costar, is a second-tier MLS that we also use but it’s data pales in comparison to the AIR CRE and top firms mainly use it as a secondary marketing tool but don’t always put their listings there. The most active and major Los Angeles commercial real estate brokers use the AIR CRE, which is member owned and created in 1960.
Supported by the phenomenal growth of e-commerce, leasing activity was strong in the first quarter after the steep declines experienced earlier in early 2020. In Q1, across the Central Market, 139 leases were signed for a total of 2,836,295 SF; the average asking rate was $0.96 PSF. Q1 leasing volume for Central LA was 25% higher than Q1 2020 levels. Another 133 warehouse properties, totaling 2,000,000 SF, were sold in the period with an average price of $291.43 PSF. The average rate will move up or down slightly quarter-to-quarter depending on how many older, functionally obsolete warehouse and manufacturing buildings are in the pool of available inventory. The limited amount of available first-generation, Class A space leases at a premium to the average rate.