The value proposition is overwhelming when comparing old, obsolete structures to developing say, a 3-story residential condominium. We often see redevelopment returns of 2 and 3 times compared to what is currently being generated at an older property. All industrial property with a decent location is open to reuse. A growing population, increased densification and worsening traffic mean there is continual opportunity in underutilized property.

The demise of big manufacturing in this region coincides with new forms of work, education, and living. Work force housing, transit developments, live/work lofts, school construction, mixed use, and industrial condos are a few of the new project types. While large, vertical manufacturers are faltering, new, smaller organizations are often taking their place at the same location. In the age of the knowledge worker, more income can be generated on a per foot basis than in the past. Thus for the right combination of location and design, higher rents can be achieved with new development projects.

On a broad policy level, more needs to be done for failing manufacturers and their workers. Substantial land appreciation also applies. If someone held a piece of worn out industrial over the past 15 years, they would have witnessed almost a 20% nominal appreciation rate per year. In my market land has appreciated roughly from $8.00 per foot to $25.00 per foot since 1990. This doesn’t even include the rents that might have been generated over the same period.

Large institutional buyers have caught on. Instead of competing for low cap-rate buildings, many are turning to speculative construction where there are better returns. However, with a few exceptions, “in fill” locations are too small for these large investors. This explains why we’ll be seeing a continuation of “big box” development all the way to Palm Springs and into Bakersfield. With Los Angeles in the forefront of the hyper-changing, post-industrial economy, the existence of World War II era manufacturing plants is an anachronism. However, these sites continue to be sources of future development for the region.