Industrial property in Los Angeles is suffering for three major reasons. Poor business conditions, an unfavorable societal environment, and a credit freeze. As these trends continue, business will be conducted under recessionary circumstances. Meanwhile, new attention will be drawn to overcoming the current malaise by innovations in financing, industries, investors, and deal structures. Until then, it’s simple. Owners will drop their prices.
The business of real estate is close to an end. Developing, investing and lending have all halted except for the most secure or distressed situations. An enormous swath of the industry is mothballed like an auto plant in the summer. Just like autoworkers, real estate practitioners are wondering if production will re-open. Lending divisions, development companies, land developers, and acquisition departments are closed until further notice. The biggest fallout is people we have all known for many years that are deciding what to do for the future.
Over the past 20 years, the decision matrix for locating a warehouse has grown so complicated that only a few real estate brokers have the ability to communicate on a technical level with clients. Many warehouse companies require labor studies, network rationalization models, transportation studies, and warehouse design. Many large brokerage companies have complied by starting practice groups within their firms or have hired talent outside to provide these services. Professionals that talk this new language are generally at the forefront of controlling the relationship.
Continue reading “The New Language of Industrial Real Estate and Its Pitfalls”
If there is one major driver that supports Los Angeles Industrial real estate, it is counted by container shipments that enter the Ports of Los Angeles and Long Beach. These shipments are singularly responsible for the development and leasing of large blocks of high-cube industrial space. When goods are flooding into the ports, industrial building development booms throughout Southern California.
Continue reading “Container Freight Volumes Decrease”
The market has shifted and building owners can’t act like they are solely in control. It’s not that vacancies are so high, but business expansion and leasing activity has reduced to a crawl. Many tenants want to stay put and extend their leases until business comes back. Smart landlords are willing to grant these short term extensions rather than have an empty building.
Continue reading “Be Nice To Your Tenant and Industrial Lands”
Everyone has an opinion about where we are in the real estate cycle. Home builders and residential lenders see this as a crisis. Commercial brokers nationwide talk about a slow down. Just this month I have seen a lender take over negotiations in a land sale, a substantial money default on a development deal, and a newer investor unable to replace his interest only loan. We are also receiving calls from sellers who passed on our “low” offers earlier in the year and a few landlords are complaining about tenants getting behind in their rent. So far, most of the problems are related to financing and over-optimistic projections. Still, this a lot of personal incidents in a short period.
Continue reading “Things Are Changing……”
For those who follow technology and real estate, Search is essential to success. Search is Google’s primary business and is how real estate buyers spend their day. When one carefully defines the relationship of search terms, the better the results. Likewise, when one defines the search parameters for property, the better the deals. Before the Internet, Real Estate Search was conducted by word-of mouth the Multiple Listing Service, and massive cold-calling. It was not easy to be specific. Today, new technologies allow pinpoint accuracy. CRM software, owner and tenant databases, search engines, aerial maps, mobile wireless internet cards and GPS enable one to segment the market into various product types. With massive amounts of capital looking to gain an advantage in different expertise areas, these new search tools have allowed Buyers to look more exactly than ever before.
Continue reading “Property Search and Community”
In the competition for industrial real estate investments, more institutionally backed buyers are dabbling with infill land, but have not yet found the formula for success. Infill sites are considered non-traditional investments because they take more effort to understand and come with substantial risk. Large buyers can not make as big an investment in infill as when they purchase a portfolio of buildings. For this reason, and until institutions learn how to roll up these non-core properties, there is still a great opportunity for smaller entrepreneurial buyers to distinguish themselves as experts in the field.
Until recently my clients preferred to stay close to home and were satisfied with property offerings in the LA Basin. Now, I’m driving more, especially east. Many are recognizing that pricing for modern buildings in the Inland Empire is considerably less on a square foot basis. Employee housing in the region is currently ”on-sale” because of sub-prime loans. Communication has improved such that top management no longer needs to reside in the production facility on a daily basis. The Inland Empire can serve as a more functional location than being buried inside Los Angeles. Finally, developers are frustrated with the limited industrial opportunities in L.A. and need to follow the growth.
Continue reading “Inland Empire and Beyond the Basin”
There are two types of property we sell. Commodity properties are typically found on the MLS and are generally offered to Users. Developer properties are land deals that will ultimately be developed into a commodity property. While it is a tidy distinction, owners of each make mistakes because they don’t understand the differences from a deal-making perspective. Each property type has its own logical steps to marketing, representation, legal, and negotiation.