Category Archives: Brokerage

14500 S. Avalon Blvd., Gardena , CA – 100,000 Square Foot Lot For Lease

Preliminary Information:

14500 S. Avalon Blvd., Gardena , CA – 100,000 Square Feet For Lease – 2.29 Acres

Rare Flag Lot Parcel.

Central Location near 110 Freeway and 105 Interchange – Unincorporated Los Angeles County.

13 Miles to Downtown Los Angeles; 11.5 Miles to LAX; 16 Miles to Harbor.

Ideal Storage Lot for Contractors, Material and Equipment Storage, Rental, Outside Uses

M-1 Zoning – Los Angeles County

Minimal Improvements – Small Office Trailer with Utilities; Mostly Unpaved. Fenced and Secluded.

$40,000 per Month NNN. Low Property Taxes – $100 per Month.

Available –  January, 2020

AIRCRE Data Sheet

PDF Flyer

Please Contact Jim Klein, SIOR; 310-451-8121

 

 

Great Example of Creative Space

This is a great example of Creative Space. It comes from Industry City in Brooklyn and shows a 14,000 square foot space they currently have available. There are 120 desks which works out to 8.5 people for every 1000 square feet. It is the information factory of the future.

Industry City was kind enough to host us last year. As you can see the space is surrounded by windows and filled with light. There are many amenities on campus – food and fitness are primary ones. Location on the waterfront is also spectacular.

For those who like to read, Jennifer Egan’s new book, Manhattan Beach, takes place not far away at the Brooklyn Navy Yard. In that scene, the protagonist was a worker in a very similar space making uniforms in a garment factory.  When you look at the site plan above, the primary difference is that the sewing machine has been replaced by the computer but the space is being used in almost the exact same way as it was 70 years before. The concept of space utilization has not changed, only the technology.

Concentration Continues at the Top Tier of Industrial Buildings

The world of big industrial has evolved with fewer and better capitalized buyers. It’s a core group of 15 or 20 nationwide owners that know the markets, have talented principals and to the delight of most sellers, they close for all cash. In contrast, the entrepreneurial developer who played such an important development role in past buying cycles has almost completely vanished from the scene. High Net Worth Funds, REITS, Pension Plans, and the Insurance Companies dominate the ranks of primary industrial investors.  Occasionally, developer partners, seek out capital from the large institutions, but control still reverts to the same dominant group of investors.

Outside of the core investors, there are always a few Users at any given time. Many are international in origin, have large personal wealth and are only looking for one location to house their main business. Because there is no “backside” leasing in a User deal, the industry still favors investors, pricing being equal. Large corporations rarely purchase industrial space today except in cases of unique production facilities.  Non-institutional and older buildings are more wide open but financing is still a limiting factor. Further, with the scarcity of Grade A properties, the definition of institutional grade has been widening to include older and smaller buildings. In other words, competition is still limited to the top tier buyers.

This greater concentration of financial firepower is generally a good development for Sellers of large industrial. There are enough Buyers so no individual can control the market, but each one has strong  closing capabilities. During the vetting, a few bidders often rise to the top for reasons particular to their immediate investment objectives. Unlike in past times, vacant buildings or short term leases are just as desirable as property with long term tenancies.

A limited set of well qualified Buyers eases the sales process if the target buildings fit the mold.  If the real estate doesn’t have any inherent title or environmental problems and the buildings can be categorized as “modern distribution”, a Seller will be rewarded with many high quality offers. The relative simplicity of selling these larger properties is a stark contrast to the typical market transaction.

For instance, leasing is the hard work of the brokerage business. Where selling a quality building is a one-to-many relationship, leasing is one-to-one . Unless the building has some outstanding features, the broker’s work is to call one-by-one, over a long period of time.  Even with all the effort, there have been some unusual recent disappointments with buildings that should have leased but are still empty a year or more later.

The sale of older buildings has its challenges but is made easier because there is not much for sale and many smaller and mid-size company owners desire to purchase for their own personal financial reasons.  But this is a more free-wheeling part of the market than the top tier because banks play a more important role and there is a wider assortment of buyers from which to choose. Finally, older buildings often come with more design and structural problems that take time to correct.

A greater concentration of building owners is becoming the norm.  The largest investment groups have already absorbed many of the most talented players in the business mostly because funding flows to the largest organizations. As this trend continues, other categories of industrial will be absorbed by these growing entities.  Re-positioning slightly outmoded product and rolling up smaller, multi-tenant is the next wave. For now, there are still a fair number of one-off property owners but their ranks are diminishing as the bigger entities grow their experience, relationships and financial resources.

 

On The Way Up

 

This diagram from RREEF shows we are in a classic upswing on the real estate cycle. Lots of money in play, rising property values, and local business is improving. It looks like we have a long way to go excepting some huge policy mistake and that's unlikely. (click through to enlarge diagram)

Real Estate Deals in the GIS and Data Universe

 

Good technology can improve real estate deal making. This article describes my experience with Geographical Information Systems (GIS) and how it has become a fundamental tool for my business.  At its simplest, GIS programs are a visual adjunct to database and contact management programs.  However, if used to its fullest, GIS can crystalize multiple property relationships to monetize real estate information by traditional forms of deal making, solve complicated problems and create new business models.

So far, in the traditional real estate industry, retailers have taken the most advantage of GIS programs by making strategic location decisions.  On the other end of the spectrum, new place-based businesses, like Yelp and Four Square use location data to build profitable, mobile enterprises. To put mapping in their proper technological perspective, consider the furor when iPhone tried to replace Google Maps with its own inferior Apple Maps.  Mapping has not only become ubiquitous in everyday life, it should be an essential part of every real estate business.

 Creating robust GIS applications has never been easier. There are inexpensive open source programs, a quantity of excellent data, and many ways to host and share applications. It’s easy  to connect to other good mapping programs through  Application Programming Interfaces (API) and Web Map Services (WMS) that when used together create powerful mapping programs.  Is this perhaps a little too technical?  There are now graduate level GIS programs being offered in 160 universities teaching great consultants to adopt mapping technology to your everyday business life. GIS is used in all sorts of industry and government departments to make critical business and marketing decisions.  Hedge funds and financial institutions are using GIS and data warehouses as a backbone to trade mortgage backed securities and real property assets, hopefully more prudently than they did in the past.

GIS combines spatial data or geographical information with non-spatial data, for example, market information (comps, tenants, owners, etc.). Many of us simply keep market data in our heads or in very basic databases. Few of us use complex algorithms to tackle complicated market problems.  Programming languages are not part of our vocabulary.  But as you are reading this article, there are computer scientists that are using the entire universe of property and geographical data “to crunch the numbers” and create very lucrative real estate businesses. 

The most obvious examples of companies using universal property data are information providers that many of us rely for our daily work. For instance, Co-Star, NAR, Niteowl, and Exceligent all have products that combine data servers and mapping capability. There are other firms like REIS or Real Capital Analytics that collect property data for extensive statistical, reporting and analysis purposes. The question is how many of us use very commonplace data analysis and mapping tools in our daily business?

I’d like to say that I do.  Alas, I’m barely one step above using Google maps and Excel spreadsheets.  But in my own rudimentary attempts at mapmaking and watching the powerful effect it has had on customers relationships, I see how GIS and data management will play a larger role in our industry.

My personal experience has been to create an application, called MAPP, designed for the way I work. Because my biggest deals have been finding “off-market” development sites, I’ve created a very simple GIS program that is able to identify infill land and older teardown buildings.   In other words, I have designed a program to meet a set of customer objectives by identifying and segmenting various property data from the entire universe of possibilities.  It’s one area where GIS is uniquely capable.

One concrete example is multiple properties I sold for self- storage development over a several year period. The majority of sites were “off-market”.  My MAPP program allowed me to match all other existing self-storage properties owned by competitors on the same map so we could immediately create a trade area of the entire universe of self-storage buildings and instantly see “off-market” locations that had ideal spacing.  By querying the owner database I created a target list of likely properties that resulted in deals.

A more recent example is a customer who purchases underdeveloped land near light rail stations.  By writing a basic radius query that identifies all property within 500’ of a rail stop, I have identified and sold several sites.  My next goal, in keeping with economic recovery, is to put the application to use by identifying large buildings in and outside of my traditional market to see if MAPP can locate ideal purchase opportunities.

GIS has its own intrinsic logic that answers questions about location and property data. If you have the right data sets, you can write a query much like an algebraic equation. Here are a few queries I have used:  Compare warehouse locations based on how much fuel will be used for customer deliveries.  Return a list of every large warehouse on a BNSF line that is within 5 miles of the Port of Los Angeles. Search for corporate owned Brownfields in the final stage of a work plan. Name every non-institutional landlord who owns buildings larger than 200,000 with extra land.  All these queries can be answered manually, but by writing a little code for GIS logic, the answer is fast and thorough.

Technically, I started my odyssey with an open source program called Map Window. The program originally resided on my local computer. I hired a GIS expert I found on Craigslist and an offshore database programmer. Parcel and ownership data is available for purchase from most counties. Municipalities offer shape files that depict all forms of urban infrastructure including rail, utilities, zoning, and of course geographical features.  I have since migrated the system onto a web server so the application is cloud based. The data I collect runs on a MYSQL server that runs independently from the map program. Because I use open source software and hire programmers located mostly in southern Asia, costs to build and maintain the program are modest.

While the technology part is important, the ability to create a specific environment around map information and to provide a solution for the customer has been the greatest benefit.   It’s by problem solving and collaboration that creates strong relationships.  Perhaps it’s no surprise that most clients are not very interested in using or understanding the MAPP application, they just want to see the selected reports and deals that can be generated. And that’s fine by me.

Even though I’ve been developing my MAPP program for several years, I’m only just starting to learn. GIS programs can be used to collect, analyze, and deal with the world’s property data in sophisticated ways. As more people begin to realize how relatively easy it is to build, I expect GIS will also start playing an important role in your business.  Because GIS is part of a large user community, I look forward to helping others as they have done the same for me.

)This article was published in SIOR Professional Report – Spring 2013)

Commercial Mortgages Are On The Way Up

 

Many have already seen charts like this one showing a big drop at the end of 2007. It explains the past four years of weak sales. The small uptick demonstrates the recent increase of deals. Since this is 2011 Q3 data, (but released earlier this month), I expect to see more improvements. The same indicators are alive in the market.  A long way from peak conditions but in the right direction. 

HOW ARE THINGS LOOKING?

 

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.

On a transaction level,  Landlords need to swallow a lot of pride to make deals. Rents are substantially below what anyone ever anticipated.  Tenants are negotiating hard.  On the sale side, and this is a surprise, some prices are much higher than one would expect based on rents.  The high ceiling, good-loading gem boxes are selling and mostly to Buyers who can take advantage of the cheap dollar. Older manufacturing buildings, like those found here, have not shared in the price recovery to nearly the same degree.

While activity is perking up slightly, it's spotty and unsteady.  In my case, I get a small run going and all of a sudden it's cold again. Likewise,  my broker friends may make a big deal, but then the spigot turns off.  Fund activity and build-to-suits are the source of considerable focus, but getting inside those deals are challenging.  Finally, there are some great land pieces all across Los Angeles, but it is still the most risky of all categories.

Overall, the picture is very uneven but as we move towards the rest of the year I expect to see less yellow on the map, and hopefully, more green in our pocket.




 


KLEIN NEWS FALL 2010

Activity Is Up, But Far From Celebratory

With the year of fear behind us and summer doldrums over, should we expect an increase of activity? Compared to the past two years of bad news, yes, activity is up. Many businesses that were paralyzed with fear are now investigating opportunities in the property market.  Private companies are looking for space just in time to replace the waning influence of government stimulus. For instance, businesses that can access low interest rates are in a particularly enviable position. The evidence is demonstrated by a few stellar deals that were purchased by a few brave souls who struck when no one else could.  Now that the great fear has receded, we are left with a bad market instead of a catastrophic one.  Buyers and Tenants are coming out of their shell to see if they can find bargains and re-launch business plans.

Up to this point in the Great Recession, property had to be priced less than either side imagined. This logic will continue, but as business emerges from hibernation, the sentiment will change from price to quality and functionality. There is no doubt this will take time and one sign will be if demand strengthens through the Holiday Season. Another sign is when I get together with my broker friends and we have deals to discuss unlike in 2009. I’ll report back if these conversations continue. 

Using the abyss as a reference point does not make for a very balanced real estate market.  But now that companies can make business decisions without the fear of being wiped out, we are inching back to practical business outcomes. But don’t let me lead you too far astray. Painfully slow growth still means long vacancy times, very marginal business expansion, and continued disappointments.  The big unknown, and a common refrain from clients, is what type of additional government action could either derail or improve a creeping recovery. Midterm elections will be one sign, but plan old leasing activity will be the best indicator.

Trust and Contracts

One lesson from the Great Recession is the importance of trust and relationships. It became clear who would stand by you in troubled times. It could be Lender and Borrower, or Investor and Developer, but Landlord and Tenant is the most familiar. While all these relationships are contractual, weak business conditions made them personal.  Rent relief was one example that demonstrated mutual reliance. Landlords would forgo rent increases or lower contracted rents in exchange for term extensions. This provided lower tenant occupancy costs, but also gave landlords better leverage with their lenders. I was a party to a few negotiations when the tenant needed help because of financial difficulties. To their word, the tenants recovered and resumed paying like clockwork. Needless to say, tenants who are perennially late or careless never receive this benefit.

Strangely, many Landlords who could not provide this relief have been unfairly tarnished.  Even though these Landlords simply abided by the contact many tenants felt betrayed. Tenants don’t realize that property owners have investor and loan obligations that don’t allow forbearance. Still, on more than one occasion I’ve had tenants make leasing judgments based on the owner’s flexibility during the crisis. Expense pass-throughs, capital replacements, and wear and tear are also areas where tenants felt misled, but are also provisions that are not well understood, explained, or negotiated.

In fewer and fewer circumstances, there is a property owner who has the power to drive down, meet the tenant in person, listen to the grievance and make a handshake decision on the spot. Too often the norm is unreturned phone calls, letter writing sagas, and poor committee decision making. While the intention is good, many larger landlords are not structured to deal with tenant financial calamities. Principals who have established trust during the negotiation and occupancy stages are more apt to help each other. Relationships solely based on the contract will lack the personal flexibility in crisis and can damage both sides equally.


 

MAPP 1.0 PROJECT

We are just finishing our first version of the Map APP (“MAPP”). It's a mapping program designed to give a spatial view of Los Angeles County commercial real estate with a focus on industrial property and infill land. MAPP combines aerial photos, parcel maps, zoning, and our personal tenant and owner data. Google Maps is incorporated for its search function. Visually, it looks like the GIS programs that many larger cities have to catalog their land use. In addition, MAPP works on a County level basis and it can be paired with different databases that have special attributes. It works particularly well for those who hunt for commercial corners, developable land, or off market buildings, to name a few examples. Because MAPP includes tenant data, it’s helpful to identify prospects, by size, use, or location, for empty buildings.

Unlike the ZIMAS portal at LA City, or the corresponding GIS-NET program at LA County, MAPP has full ownership records, the ability to generate mailing and contact lists, and to identify properties with special characteristics, en masse. For instance, we can identify all development sites within 500’ of a metro stop, properties located in special economic assistance areas, or industrial properties served by rail lines. Available and potentially available properties can be viewed for an armchair tour. MAPP will write back to the database so as you traverse the County it will record properties that are visually identified.

We will be using MAPP 1.0 for customer assignments and showing the program on WebEx conferences by mid October. Because of vendor agreements, use of the program will be limited to clients and specific projects. MAPP will cover a lot of ground and provide fairly complete information quickly. The database is customizable to specific client needs and processes.  By incorporating programmers, mapping technology, and open source software we can begin to adapt to a post recession environment. One goal is to locate and evaluate opportunities in a mobile and connected world. The other goal is make customers better at what they do.


Recent Deals

3 Acre Land Sale in Huntington Park.

2 Acre Truck Yard Lease in Gardena.

50,000 Square Foot Lease in Carson.

7,500 Square Foot Lease in Gardena.



New Listing at 14710 Maple Avenue – 50,000 SF of Ideal Manufacturing with Large Yard

2 Units Remaining – Best Small Distribution, Gardena – 7350 SF and 8650 SF

5 Acres for Sale on Los Angeles Avenue, Simi Valley, CA – 100% Location.

1.6 Acres Available for Free at Wilmington, NC Airport.

 

Thanks for Subscribing,

Jim Klein, SIOR

310-451-8121

jimklein@kleincom.com

INTRODUCING MAPP 1.0

 

 
Over the summer we created a commercial real estate mapping application that combines the important commercial real estate information  for Los Angeles County in one place. It is designed to help buyers, tenants, developers, and investors get a spatial view of the real estate commitment they are about to make. We call this map application MAPP 1.0.

MAPP 1.0 combines source data from the following areas:

  • Parcel Data including all relevant Assesor information and shape files.
  • Aerial Photography superimposed over the parcel data.
  • A proprietary database containing all Tenant, Owner, and Available Property information.
  • Zoning from the largest municipalities in the County (more is being added weekly).
  • Special  districtsthat allow for high density development.
  • Custom fields describing the investment quality of the buildings, the potential for infill development, and field notes.

While additional source data is being added for more functionality, MAPP 1.0 can quickly identify the primary attributes of every property in Los Angeles County. The initial focus is being placed in our specialty areas of larger industrial buildings and infill development. Our 30 years of brokerage experience has demonstrated that sometimes the perfect property is listed on the open market, however more times than not, it takes searching the off-market to locate the more perfect opportunities. For instance, MAPP 1.0 can locate all development sites within 500’ of a Metro Rail stop and determine the likelihood of a purchase. We can identify every rail-served parcel in the County for those businesses that require rail service. MAPP 1.0 can find older teardown properties that are ready for redevelopment.  For marketing property, if you have a 100,000 square foot building, we can locate every tenant in a smaller building and quickly generate a list of prospective tenants.

While we are immediately working on upgrading MAPP 1.0, we have developed a unique and powerful real estate app. We would like to demonstrate MAPP 1.0 and put it, and us, to work for your next commercial real estate decision.

 

Tenants Are the New Opportunity Buyers

Tenant decision making has radically changed since the Great Recession. The combination of low interest rates and falling prices mean that mortgage payments are the same as or less than rent.  This has been a fairly rare occurrence over my 30-year career. Tenants with established histories are finding some great bargains. Even companies that may have difficulty obtaining loans and lack large down payments can team with sophisticated investors to solve many financing hurdles.
Searching for deals was once the domain of shrewd real estate operators, but uncertainty, credit and legacy problems have sidelined many of the aggressive buyers. Because of vacancy risk, the value of a tenant is the critical difference in closing deals. With the threat of slowing growth, a year vacancy can destroy a proforma. In other words tenants have become the only viable buyer for many properties.
Before the recession, industrial real estate was marketed on an efficiency ranking.  Physical attributes such as maximizing throughput with loading doors, yard depths, ceiling heights, and access was the primary criteria for many tenants.  Many developers and users strove to create the the best designed warehouses for maximum velocity. The supreme example is a cross-dock building with large side yards for container storage. Metrics included number of loading doors per square foot and cubic storage capacity. While tenants will always want functional properties, many will sacrifice the most efficient features for more affordable occupancy costs. This is a significant change wrought by the Great Recession. A lower rent for a less efficient building is an outspoken preference.


The desire to reduce costs coupled with an eye on profiting from property has changed the dialogue with tenants. Not only is there a wide selection of choices, but many tenants are starting to probe more deeply. They want to know when the property was acquired and what are the characteristics of the property owner. If the building was purchased in the boom, then price flexibility will be limited until the bank takes over. Moms and Pops tend to be better Sellers than institutions, although not necessarily true in every instance. Certain areas also tend to be better long term investments. Cities with a history of good governance and pockets of institutional ownership are a couple examples of preference.


Over the years, some very smart buyers have followed a different acquisition strategy that bears some reflection. By luck or by skill they have located their businesses in locations that receive preferential zoning entitlements. These properties could be in high density commercial corridors, near transit hubs, or for other reason are more valuable than the existing improvements merit. In a growing city like Los Angeles well located properties go through periods of excessive valuations. While we may be some time from development activity, if a user can satisfactorily occupy an older, well-located property, upside will drop in his lap.


In the first part of this year, there have been some very good purchases.  I have seen prices as low as $45.00 for older properties that need work, but mid $50’s to mid $60’s for rather decent buildings. One of the largest, but older industrial buildings in the County sold quietly this year in the mid-$40’s. This is not to say deals are easy to find, but with declining economic news, we are closer to the beginning than the end of the deal wave.