Aerotropolis – Book Review
Aerotropolis – The Way We’ll Live Next
By John D. Kasarda and Greg Lindsay
Farar, Straus and Giroux 2011
SURVIVING THE MARKET BREAKDOWN – 4 YEARS LATER
The first signs of a market collapse in commercial real estate began in August of 2007. Home builders started to forfeit large deposits on land deals. The rest of that year, other developers pulled out of deals until it was impossible to sell land to private developers. Many people missed that signal because User building sales were still climbing and continued until the Lehman collapse one year later.
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THE SEARCH IS ON……
The search is on for industrial. Developers with tenants in tow are looking for industrial land. Big sites are needed for a wide range of reasons. Some users want very customized buildings. Others can’t find modern, first class buildings so they are enlisting developers to build one – if the land can be found. And many of the off-market sites are being picked over carefully. Finally, land prices have come down to a point where new construction makes economic sense.
Texas Governor Woos Vernon Businesses
You may have seen this article earlier in the week about Rick Perry inviting businesses in Vernon to consider relocating to Texas. It’s not the type of press California needs as it struggles to recover. Once this news item goes viral it won’t take long for other states to get the same idea to woo California business. Plus when states start looking at the economic benefits of moving companies from Vernon, the same math will apply to every city in California. Perhaps the most unsettling part of the article is that the conditions leading up to the proposed company pilfering were caused by California’s own government leaders. Firstly, greedy Vernon leaders created the attention, but the Speaker of the California Assembly, by proposing to change the governance of a very successful business community, is creating the groundswell to consider alternatives.
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COMING OUT ON TOP – SIOR SPRING CONFERENCE
Firstly, the mood was more upbeat and optimistic. Most people agree that the past few years were terrible but since the end of last year activity has increased. Nationwide, there is agreement that we have a bifurcated market with quality, institutional grade and trophy properties hitting 5% cap rates. Prices for these properties have returned to previous highs. Meanwhile, everyday buildings that most of us broker are still in the doldrums. In order to capitalize on this divergence investors are focusing on the $1MM to $5MM market where high returns exist.
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HOW ARE THINGS LOOKING?
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Customers always ask me, “How do things look?” Here’s one way to answer. In this roughly one square mile grid of Broadway/Rosecrans, there are about 120 buildings of decent size. I count 25 that have availability. Perhaps not the entire buildings are on the market, but enough to depict this picture. That’s about 20% of the buildings with significant availability. I’m working on a lease in Chatsworth and there is even more yellow. This is a pretty consistent picture throughout Los Angeles. In contrast, there have been times when there is no yellow.
NEW GARDENA OFFICE
We recently opened a new office on Gardena Boulevard – 1204 W. Gardena Boulevard, Unit A, Gardena, California, 90247. We are between the Chamber of Commerce and Guilianno’s. This is an ideal location that puts us close to many of our longstanding customers.
With this office we continue our strategy that focuses on large industrial and infill land throughout Los Angeles. Now with the Gardena, we can easily handle many of the local assignments.
Please stop by.
Power of Data
Our MAPP Program was recently featured in the Cover Story of SIOR Professional Report. The article describes out GIS/Data program for Los Angeles Commercial Real Estate.
https://kleincom.com/wp-content/uploads/2011/04/Power-of-Data.pdf
USER MARKET SHOWS SIGNS OF NORMALIZING
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The biggest surprise this year is how many buildings have been bought up at fairly high prices. We are not out of the doldrums, but there is a scarcity of property for sale. Many buildings that have been sitting around for years are now subject to competitive bidding. Brokers are out looking for “off-market” deals – not for speculative investors, but for Users. While pricing is not at the highest levels, they are in a lofty range and somewhat removed from an otherwise weak leasing market.
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Winter 2011 – Positives, Negatives, Quality and Change
A few years into the Los Angeles commercial real estate recession and some things are clear. Good deals are limited. Distress never hit the street. There’s an evident turn around but most people aren’t recovered. And the smart money is still cautious – for instance, no vacancy risk.
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