Tag Archives: industrial

Market Trends & Indicators, Note, Propound

Distressed Real Estate By Commercial Property Type

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In below graphic, note how strong the industrial category is compared to the other commercial real estate property types. Office and retail are the two most vulnerable.

Moving forward with the slow decline in rents and values, industrial real estate is well positioned to weather economic challenges.

Potential distressed properties have delinquent payments, low occupancy and thus high vacancy, maturing debt / loans, or other looming troubles. These factors could cause the properties to default on their loan obligations and trigger a foreclosure sale.

Market Trends & Indicators

Industrial Demand and Dwindling Pandemic Savings

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Here is a great summary from the WSJ: Americans built up about $2.1 trillion in excess savings during the pandemic and its immediate aftermath, a cushion for household budgets and a boost for consumer spending. Since August 2021, they’ve drawn down about $1.9 trillion of that. “This implies that there is less than $190 billion of excess savings remaining in the aggregate economy. Should the recent pace of drawdowns persist—for example, at average rates from the past three, six or 12 months—aggregate excess savings would likely be depleted in the third quarter of 2023,” Federal Reserve Bank of San Francisco economists Hamza Abdelrahman and Luiz Oliveira write in a blog post.

The dwindling pandemic savings during 2023 makes me wonder if that is correlated with the dwindling industrial demand that started at the beginning in 2023 and continues here in Los Angeles. Tenant demand for warehouses has fallen sharply this year. Buyer demand has been dampened by the interest rate increases. If the pandemic savings do run out this year then I wonder if consumer spending will follow. If that is the case and consumer spending accounts for about ⅔ of GDP then a slowdown could materialize.

Market Trends & Indicators

High Land Value As a Percentage of Total Property Value in Los Angeles

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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.

Market Trends & Indicators

Rising Lease Rates

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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.

Available Property, Food Industry

$10M Leased Investment , Los Angeles Industrial Building

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Triple Net NNN Leased Industrial Real Estate Investment Property for sale

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.