Tag Archives: los angeles

Commercial Property Insurance Update

As with any insurance market, the commercial property insurance market is constantly evolving, with new trends and challenges emerging that can impact both insurers and policyholders alike. Across the country, there have been several regulatory changes in recent years that have added costs and increased compliance requirements for insurers in this space. Specifically in California, there has been an increase in non-renewal notices as many insurance companies withdraw from the marketplace, most notably in Los Angeles County but also throughout the entire state.

California has become one of the most difficult places to write insurance, so many carriers are exiting the market, reducing capacity, or only looking to insure best-in-class buildings.

Risk. Concern has grown over the incidence of natural disasters including wildfires, flooding, landslides, and earthquakes. This has caused premiums to further increase and caused reinsurance costs to be passed down to policy holders.

Insurers also consider a property’s likelihood for litigation and heightened number of claims. Multi-family is considered high risk because the human factor by nature yields an increased frequency of claims. The same can be said of retail shopping centers where there is increased foot traffic. In essence, the more people, the more claims. Industrial buildings and office properties, on the other hand, are considered moderate to lower risk, unless they have a very high vacancy rate which can make them susceptible to theft.

Building Age: In Los Angeles where the building stock is aging, the preferred market prioritizes either structures built within the last 30 years or those with records reflecting regular maintenance and upgrades. Insurance companies don’t inspect properties every year, which can have unfavorable outcomes for buildings that go several years without review. For example, many carriers are shying away from Los Angeles’ Downtown and Garment District because of the high incidence of claims coming from older buildings that haven’t been kept up. A lot of these older buildings are being placed on the Excess and Surplus Market (E&S) when the risk is too high to insure, which results in higher rates, and in some cases, limited coverage.

Here are some strategies:

  • Maintain accurate records. Well-kept documentation is the best tool an owner can have to prove the maintenance and renovation of their property. Remember: to secure a carrier in the preferred insurance market, the building does not have to be new, but the systems must be up to date. A 100-year-old building can get placement if inspections and records reflect optimal maintenance.
  • Check your online presence. These days, Google is the number one underwriting tool for insurance companies other than classic in-person visitation. If you haven’t already, Google your building to see what an agent will see online, then take action to improve your property’s virtual presence. This might mean removing encampments, replacing a roof, and cleaning away graffiti.
  • Practice preventative maintenance. If you don’t have a regular and consistent maintenance plan in place, it could lead to higher rates. Keep in mind that many industrial buildings were constructed 40 years ago or more, which puts them at the tipping point when it comes to insurance. Carriers are looking very stringently at buildings that have not been well maintained, but making regular improvements can improve your odds of good coverage.

Commissary Industrial Commercial Kitchen For Lease, Los Angeles

  • Industrial Commercial Kitchen Commissary, Available listing.
  • 2,400 SF Cooler and 1,300 SF Freezer.
  • 60′ Hood, Clarifier / Grease Trap, Floor Drains.
  • 2 Fenced Parking Lots.
  • Ground Level Truck Loading Door.
  • 800+ Amps, 240/600 V, 3 Phase Power.
  • Food Processing Health Dept Permit.
  • Ideal for meal kit prep, restaurant commissary, party event catering.
  • Downtown Los Angeles next to City of Vernon.
  • Off 10 Freeway at Alameda St.
  • Sublease through Jan 2027.
  • Contact us with interest.
Commercial kitchen cooking and prep area
Refrigerated cooler
Freezer for storage of frozen foods
Racked dry storage area that is 23 foot high
Wash room, scullery with dual sinks and floor drains

Cold Storage Freezer Building for Lease in Vernon, Los Angeles County

  • Racked Cold Storage Space
  • ±46,000 SF of Freezer/Cooler Space, 0° to 52° Convertible
  • 37° to 40° Cooler with Trench Drain for re-packing
  • ±5,417 SF Refrigerated Dock, 40°
  • 9 Dock High Loading Positions
  • ±4,000 SF of Corporate Offices
  • 55,000 Square Feet of Total Building
  • $2.50/SF NNN

Contact us with interest.

Business Improvement Districts aka BIDs

A Business Improvement District (BID) is a formally recognized non-profit organization dedicated to improving the quality of life in a defined region. BIDs vary in the supplemental services they provide, such as public safety, maintenance, marketing, and capital improvements. The efforts are funded by a special assessment paid by the property owners in the district. A BID is a public/private partnership, which allows governing bodies and property/business owners to unite in a collective effort for the maintenance, development, and promotion of their commercial district. They can help to manage vagrants and homeless encampments and all the filth and trash that they produce on city streets and sidewalks.

BIDs in Central Los Angeles

The Downtown LA Industrial District BID extends from San Pedro to Alameda Streets and from 3rd Street to Olympic Boulevard— a nearly 50-block area in the heart of Downtown Los Angeles. This area is the historic home of seafood, produce, flowers and a variety of products shipped in and out of Los Angeles by air, rail and sea. It’s also home to wholesalers, restaurants, cafes, and in more recent years startups and mixed-use retail/office centers.

The South Los Angeles Industrial Tract Business Improvement District was established in 2007 and has had a tremendous impact in improving the area. SLAIT, aka the Goodyear Tract, has a long history as a vibrant industrial district and looks forward to a promising future. It is one of the more active business districts in the City, with approximately $1.4 billion in sales, over 200 companies, and approximately 4,000 employees. The South LA Industrial Tract BID is a self-imposed, annually assessed, Business Improvement District (BID) comprised of 152 commercial property owners representing over 400 parcels. The BID was formed with the sole purpose of enhancing the industrial area primarily through safety and maintenance programs and is approximately 22 blocks; an area bounded roughly by Slauson Avenue on the North, Florence on the South, Central Avenue on the East and Avalon Avenue on the West.

The Arts District is a fiercely original, urban neighborhood, situated on the eastside of Downtown, boarded by the Los Angeles River and walking distance to Union Station and City Hall. The district is home to galleries, restaurants, creative office space, live/work lofts and upscale condos with a hip urban vibe. The streets are rich in character as local street artists have turned building walls into canvases showcasing their artwork. Many of the neighborhood’s business establishments are tucked into early 20th century warehouses and former factories. Institutions like the Hauser and Wirth Gallery, the Southern California Institute of Architecture and the Los Angeles Clean Technology Incubator help give the Arts District its distinct character.

The LA Fashion District Business Improvement District (BID) serves a 107-block area generally between 7th Street to the north and the Santa Monica 10 Freeway to the south, and from Broadway to the west and Paloma Street to the east.

New 4-5.5% ULA Transfer Tax for Properties Sold in the City of Los Angeles

Measure ULA, commonly known as the “mansion tax,” would impose a new “Homelessness and Housing Solutions Tax” on transfers of residential and commercial real property in the city of Los Angeles valued in excess of $5 million.

Under the measure, sales of residential and commercial real property valued at over $5 million but less than $10 million would be subject to an additional tax at the rate of 4%, while sales of properties valued at $10 million or more would be subject to an additional tax at the rate of 5.5%. The new tax would apply to the entirety of the sale value, not solely the amount in excess of the $5 million and $10 million thresholds, and regardless of whether the property is sold at a gain or a loss. The thresholds would be adjusted each year based on inflation. The tax would apply to property sales occurring on or after April 1, 2023.
The new tax would be in addition to the existing documentary transfer tax imposed on property sales in the city of Los Angeles, which is imposed at a combined city and county rate of 0.56%.

This tax will have a negative impact on property sales, especially industrial real estate sales given they are generally sold at a higher value than many other types of properties. The tax could possibly make properties in the City of L.A. less attractive to buy.

Who will end up paying the new real estate transfer tax? Below are the percentage of sales based on recent data for each property type.

  • Single-Family Residences and Condos: 2.6%.
  • Multi-Family Apartment Buildings: 6%
  • Commercial (office buildings, retail, etc.): 11%
  • Industrial: 19%
  • Other (vacant land, utilities, etc): 1.9%

    The ordinance exempts certain transfers from the ULA Tax. Transfers to non-profit entities, Community Land Trusts, and Limited-Equity Housing Cooperatives are exempt, as these are the types of transactions the City is intending to encourage.

    On December 21, 2022, the Howard Jarvis Taxpayers Association and the Apartment Association of Greater Los Angeles brought suit in state court challenging the validity of the ULA Tax. Plaintiffs argue that the ULA Tax is a “specific tax” prohibited by the California Constitution on the grounds that ULA Tax revenue must be used for specific purposes. The litigation is currently pending.

    Above data from An Analysis of Measure ULA, by UCLA Lewis Center.

    Initiative Ordinance ULA: A 4-5.5% tax on real estate sales in L.A.

    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.

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

    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.

    Distillery for Lease, DTLA Arts District

    Distillery in Downtown Los Angeles Arts District, for rent
    • Prime Arts District location, with famed restaurant Bestia down the street and Soho Warehouse across Santa Fe Ave.
    • Turn-key state of the art distillery built in 2016 with brand new equipment
    • Brick walled tasting room with high ceilings, polished concrete floors and industrial bar
    • Still room with observation window, bottling & labeling machines, ethanolstorage tanks and water treatment system
    • Large warehouse in back with loading dock and alley access
    • Three (3) parking spots and additional parking is available
    • Rent: $18,000.00 NNN
    • Operating expenses: $1,600.00/Mo or $0.36/SF
    • Contact us with interest.

    This property is listed by a separate firm.

    Cooler Freezer Warehouses & Food Processing Buildings – Available Listings in Los Angeles

    Cold Storage Warehouse with many dock high loading doors with insulated dock seals for refrigerated truck trailer loading of frozen food products.

    In the past few years the Southern California industrial market has been very tight in available cold storage warehouses and food production facilities. Here is a current list of buildings that have some of the following food improvements: freezer, cooler, floor drains, clarifier, refrigerated staging areas, and food grade production rooms. Locations include Los Angeles, Orange, and San Bernardino (Inland Empire) counties. Available for lease or sale / purchase by a variety of firms.

    Rising Lease Rates

    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.