The Macro View

Similar to 2011, this year starts with a favorable outlook. GDP is up, unemployment rates are down and the first quarter of 2012 saw improvement in leasing activity. Development has also returned in some selected areas. Industrial developers are preparing sites and building pads with the goal of constructing the building once they secure a tenant. Some have moved from the modified build-to-suit to actually going spec. The focus is on large buildings where developers can get the per foot cost of construction down. Ecommerce and consumer logistics are a big driver for new buildings.

Continue reading “What’s New – Spring 2012”

We looked at building prices over the past two years. We put in everything we could find – not adjusting for size or quality. From the beginning of 2010 until today we found prices about the same and slightly leveling down. As you can see for yourself on the above scatter chart, the average Gardena building is in the $80.00 range. It’s been dropping $5.00 or so over the period. With all the news regarding an increase in manufacturing and better employment numbers, so far these trends have not increased industrial building prices.
Continue reading “Local Industrial Prices – Gardena”

We sold the Maple Avenue property last month. The owners went to a lot of effort to make the property market-ready. This included painting both the inside and outside of the building. They installed new ceiling foil, repaired the lighting, spray washed the floors, slurry-coated and striped the parking. The single biggest expense was installing a new concrete yard. During the marketing period all the landscaping was maintained and the building was kept clean. The purpose of all this effort was to make the building look attractive and ready for a buyer to occupy. Because the building looked better than others on the market, we were able to obtain a premium. In today’s maket, making sure your building looks good and is in “move-in” condition will result in a reduced vacancy, a better tenant, and higher rent. Owners need to spend money on their property if they want to have good results.

Continue reading “Lessons Learned From Two Recent Deals”

Something new has been added to the industrial areas of Los Angeles. Campers and trailer homes are dotting the industrial streets and unfortunately they are becoming an eyesore and a nuisance. But more importantly they are driving tenants away from properties where the campers are parking. I have experienced this first hand.

Continue reading “ROGUE CAMPERS ARE DRIVING AWAY TENANTS”

I've reprinted this chart from The Next Convergence by Michael Spence, a Nobel Prize Laureate. While the topic of the book deals mostly with the globalization of economic growth, he spends some time looking at financial shocks and how that partly influences global divergence. One small section of the book looks at periodic systemic risk and how that damages investment returns.

Continue reading “Investment Returns and Systemic Shock”