How to Find the Best Industrial Building Today

How to Find the Best Industrial Building Today

How to Find the Best Industrial Building Today

Map of Where Industrial Occupiers Move
Where Industrial Occupiers Move

In less than 18 months, the industrial building market has shifted from low vacancy to abundancy. There are now 215 industrial spaces, greater than 50,000 square feet, available in the Greater Los Angeles Basin. This does not include Orange County, Inland Empire, or San Fernando Valley. Only the areas you see on the map (below). About 20% is sublease space.

The best value for most tenants is second and third generation spaces. Many of these buildings built since the year 2000 have the same characteristics as brand-new buildings except for ceiling heights, although many of these 2nd Gen buildings still go to 30’.

  • 36’ high buildings came in around 2023
  • 30’ – 32’ Clear was the norm starting in 2000
  • 24’ Clear started as far back as 1975

Older buildings are equally functional as new buildings for less rent, especially if they have a low tax basis. One exception is if the tenant plans to install interior warehouse installations like mezzanines or specialty racking and automation. In these cases, latest generation buildings have an economic advantage because of height.

Some of the calculations we perform to determine functionality include:

  • Location and Distance
  • Docks per 10,000 SF
  • Building to land ratio
  • Cubic Capacity and Cost per Cube
  • Property Taxes/Expenses
  • Ceiling height
  • Sublease

To identify the better buildings, we subject all available properties through a macro analysis. This is the best way to identify differences in functionality and cost when there are a lot of choices.

Here is an example:

Let’s say you are in 100,000 square feet in the South Bay and you want to double in size. Some tenants will move completely to put everything under one roof. Other tenants will look for a satellite building as an interim step. Most South Bay companies will look locally and as far as Santa Fe Springs and Mid Counties. Some will want to go as far as IE West. What will you find?

Streamlit Demo View
Streamlit Demo View

We model the entire market on the Kleincom Industrial Building Analysis we developed on Streamlit. For this report (100,000 SF to 250,000 SF), we identify 55 choices of which 14 are subleases with terms of at least 3 years (some up to 5). For demonstration purposes, we will leave aside, the additional 80 or so buildings in Inland Empire West (Rancho Cucomonga, Ontario, Chino, and Fontana) that meet the size requirement.

Using Ceiling Height with 24’ as the minimum, we establish the following distribution. For most tenants, 30’ to 32’ is the sweet spot.

All Buildings 100K to 250K
All Buildings 100K to 250K

Buildings are dispersed over the entire Los Angeles Region.

Buildings 100k to 250K L.A. Basin
Buildings 100k to 250K L.A. Basin

The second factor to sort the choices is the Loading Dock Ratio measuring docks per 10,000 square feet to determine loading efficiency. Any dock ratio greater than 1.5 doors/10,000 square feet is considered highly efficient and closer to 2 docks/10,000 SF is superior.

Docks Per 10k SF
Docks Per 10k SF

Looking at the top results, it’s not always the newest buildings that are the best choices. You can lease 2nd or 3rd generation buildings for $1.75 to $1.95 per foot (all-in). About half of the buildings are 30’ or greater.

Results Table
Market Area Size Rate Month Clr Year Cubic Ft Dock Ratio B:L
Gardena/ Compton 300000 1.6 $480,000 26 1987 7800000 3.33 40%
Carson/Compton 300000 1.53 $459,000 25 1970 7500000 1.84 52%
Carson/Compton 285000 2.2 $627,000 32 2006 9120000 2.24 41%
Carson/Compton 250000 1.51 $377,500 25 1972 6250000 2.17 60%
MidCounties 250000 1.8 $450,000 32 2002 8000000 2.05 59%
Carson/Compton 150000 2.1 $315,000 36 2024 5400000 2.84 60%
Commerce/Vernon 150000 2.6 $390,000 36 2024 5400000 2.11 55%

For some tenant’s subleases may be the right answer because the terms are relatively short, and the financial commitment will be less. Ecommerce tenants and larger Amazon/Temu Sellers are drawn to subleases. The top subleases have exceptional loading and low property taxes. In most cases, landlords will renew when the lease expires.

Best Subleases
City SF Yr Blt HGT DH Dock Ratio Years Remaining
Carson 300000 1973 22 40 1.33 3.69
Industry 225000 1996 30 25 1.11 5.58
Torrance 200000 2000 30 30 1.50 2.69
Torrance 135000 2001 30 25 1.85 3.44
Commerce 125000 1957 22 55 4.40 5.28
Santa Fe Springs 120000 2003 30 30 2.50 3.78
La Mirada 100000 1997 30 20 2.00 2.44
Compton 100000 1981 24 15 1.50 3.02

Experienced tenants will use site plans to decide. There is a preference for a more rectangular building than a square so you can load more trucks simultaneously and divided to sub-customers if necessary. Here’s an example of two buildings of approximately the same size and asking rent. Most tenants would prefer the first building because loading exceeds 2 docks per 10,000 square feet, it has additional trailer parking, and the warehouse can be easily divided into sections while maintaining optimum functionality.

The second site plan is reasonably functional but only has 1 dock per 10,000 square feet, can only be divided in half and is less functional than the first example. For the same cost, most tenants will choose the first building.

With the high cost of land and construction costs, developers need to maximize building coverage to compete and make a profit. In other words, developers are often forced to build the largest possible building on the site while doing their best to keep the building functional. As you can see, some buildings are more functional than others.

Every tenant has different priorities, but most revolve around the same criteria of location and function. At Klein Commercial, we have 40 years of corporate real estate experience locating the best buildings for our clients. Our latest tool, the Kleincom Industrial Building Analysis, will help you make the best choice amongst all the available space on the market today.

How Is Industrial Real Estate Today?

How Is Industrial Real Estate Today?

Map showing electrical symbol for buildings with increasing size based on building
Power Map of Buildings In LA County

Industrial real estate is a diverse business that includes Investment funds, developers, private/family owners, corporations, occupiers, and a mix of product types and industries. Industrial buildings are in every community and are the source of employment, production, distribution, and wealth for many. The nation’s economic health rides on the success of industrial real estate.

There are several factors that are driving deals today. Broadly, these include Interest Rate Policy, US Industrial Strategy, and Local Municipal Governance. Everyone is affected differently. For example, higher interest rates are never good for real estate, though they affect sales more than leases; sale transactions are interest rate sensitive while leasing is supply and demand based. As an experienced broker, we use detailed knowledge, market analytics, and long-standing relationships to help you in making the best decision.
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2021 Remains an Unbalanced Industrial Market

2021 Remains an Unbalanced Industrial Market

The industrial property business has grown from a real estate niche serving mostly large corporations and owner/users to a favored investment of large institutions. The rise coincided with the great manufacturing upheaval of shuttered plants as companies shifted production offshore. Goods return in containerized shipments and begat the new industry of logistics. The result was increased liquidity of both goods and capital. A situation that is ideal for warehouse development and investment. Today’s industrial marketplace is made up of global and national 3pls, shipping companies, e-commerce, and on the capital side, Industrial REITS, large investment funds, and a handful of developers. The Covid Supply Chain phenomena and an increase in tariffs has compounded an already unbalanced space market to acute levels
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Streaming Industrial Real Estate

Streaming Industrial Real Estate

Streaming is the talk of Hollywood. The biggest adaption since television. Technology is replacing human decisions with lessons from on-line, eCommerce and subscription. It’s happening to industrial property. Real estate is already a superior cash streaming business, now with more means to enhance revenues. Visible effects of streaming appear with large space take-downs by studios and independent producers. Agency, too, is being disrupted because the value of data is surpassing personal relationships. Financial concentration and streaming technologies are creating a new real estate business. Virtual and artificial intelligence programs are essential to move forward in these new conditions. Continue reading “Streaming Industrial Real Estate”

Ownership Concentrations in Los Angeles Industrial Real Estate

Ownership Concentrations in Los Angeles Industrial Real Estate

Every August, the Los Angeles Tax Assessor releases its annual Tax Roll that lists all ownership in Los Angeles County. This is valuable data and serves as an important part of our statistical analysis for the year. In other words, Tax Roll data helps us find properties to purchase. For Tax Year 2019/2020, the share of Institutional ownership increased in all size ranges, particularly larger buildings. For investment buyers, more focus on smaller buildings will be fruitful because there is less institutional concentration.

percent of institutional ownership
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Economic Development in Greater Los Angeles

Economic Development in Greater Los Angeles


More so than ever before, cities are vying for companies that create jobs. There’s the policy aspect that favors clean and green jobs. Then there’s the backroom bargaining that favors successful outcomes. Companies that can offer employment would do well to study some of the recent newsworthy examples. They include the failed attempt by Los Angeles to attract AnseldoBreda, local jostling to snare Tesla Motors, competition for Eli Broad’s museum, Los Angeles Stadium in the City of Industry, and the smaller manufacturing deals coming through the CRA of Los Angeles. Each one is fairly lucrative to the company and does not necessarily fit any set model. They are similar to the large retailers, like Costco or Walmart, who were able to negotiate attractive packages for redevelopment funds, property tax breaks, and property development benefits. I haven’t seen any studies if these retail developments met city economic expectations, but certainly the recent raise in sales tax makes up any marginal differences. It pays to understand the multitude of incentives available from local, state and national agencies.
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Global Manufacturing And Los Angeles

Global Manufacturing And Los Angeles

More and more, there is an element of global manufacturing that I call “shelled out” production. There are no signs on the building. There is no one in the office. The workers either pretend or truly can not speak English. The manufacturing is composed of sub-assembly and contract piece work. There is no one in charge and the workers don’t know where their goods will go. As soon as the customer changes its allegiance to a slightly lower cost provider, the entire operation can fold. Our manufacturing system is largely devolving to the manufactured part and who can make it the best and ship it the fastest. There is virtually no other measure.
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Los Angeles Freight Airports

Los Angeles Freight Airports

View Los Angeles Industrial Features in a larger map

Industrial property is not going away, but it’s changing. Overall, only the best located properties or those that are adjacent to existing residential will be conversion candidates. Those industrial buildings safely tucked away in M-zoned districts will be protected. Whether there will be productive businesses for the older buildings is another question. The price difference between low-clear industrial and modern distribution space continues to widen.

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