• 23,500 +/- Square Foot Industrial Building
• 44,000 +/- Lot – Free Standing Building
• Minimum Ceiling Height: 16’10”; 2000 Amps Power 277/480V
• Fenced and Secure Yard
• 1800 SF of Offices; Separate Shop Bathrooms.
• Dock-Hi and Ground Level Loading
• Additional 2700 SF of Sprinklered Storage, Not Included in Square Footage
• Available January 2020
• Asking $22,300 per Month Gross ($.95 PSF/Mo.) with Annual Rental Increases

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For more information, Please Contact:
Jim Klein, SIOR; jimklein@kleincom.com
310-451-8121

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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.

Other highlights from the Tax Roll include:

• 250,000 SF and Greater: Non-institutional owners in this range include many national corporates who see their facilities as critical infrastructure to own. These facilities serve cold chain, cross-dock trucking, aerospace, pharma, and film studios. There are only a few family owned properties except for older buildings.
• 100,000 SF to 250,000 SF: There are more investment partnerships and professional operators. Not necessarily institutions but properties are well managed. Not many families.
• 50,000 SF to 100,000 SF:  There is growing institutional interest in this range. More families, privates, and partnerships with properties that can be improved by professional ownership. This is a favored place to deploy new capital. Buildings sell between $10MM and $20MM.
• 25,000 SF to 50,000 SF: are predominantly owned by families, small corporations and investment companies who favor multi-tenant properties. Because of the size, it is not favored by institutions but is a primary source for private investment.

In addition to ownership profiles, Tax Roll data allows the targeting of properties by other criteria. For instance, on a geographical basis, excluding the San Gabriel Valley is warranted because of Chinese disinvestment. Similarly, buildings that serve the Ports of Los Angeles and Long Beach may also see pullback because of trade disruption. Positively, the energy and growth radiating from the Arts District is creating new demand  to regenerate many older buildings based on their proximity to the center.

By combining Tax Roll data with GIS and imaging, we create the intelligence that determines the buying plans for many investor clients. While we are experts at parcel level analysis, it is our personal relationships and in-the-field experience that will give you unrivaled insight to close deals.

We’ve come to end a long period of consolidation in the warehouse and distribution sector. Particularly over the past ten years, a handful of national owners have rolled-up a vast network of separately owned warehouses into an industrial building behemoth across the best locations. It’s a feat worthy of acknowledgement but consolidation marks a turning point. The buccaneering ethos of deal-making has been permanently replaced by a staid, institutional mindset. There is a final hurrah for Private Investors and that is Creative Industrial.

Creative Industrial is in its infancy and is not yet recognized as a product type. There is a void of institutional funding that allows room for new capital. Creative tenants, big and small, generally have better than average credit. Creative tenants will make expensive improvements by building studios and installing equipment. Downtown Los Angeles and Bushwick/East Williamsburg in New York are two examples where obsolete buildings are being turned into Class A Investments. While still the preserve of mostly individual investors, Creative Industrial will comprise the next multi-billion dollar REIT.

Creative Industrial goes way beyond the Arts Districts, it’s the “creative vernacular”, typified by light and space, that will be the next wave of industrial building improvements throughout the region. Light is created by cutting in windows and skylights. Space is an aesthetic that supports operations, creativity, and more pragmatically, increases income by making unusable space, rentable. Stemming from temporary improvements, made to buildings to obtain short term income, many landlords and investors have caught on that creative redevelopments can boost rents.

The creative vernacular applies to the vast number of buildings beyond the special districts and into the general heartland of industrial buildings. Beyond the buzz, there are many buildings that have been left to deteriorate and require improvement to attract the next generation of tenants. Creative Industrial is a value-add strategy for buying right, improving, and increasing rents.

Rates of return reflect general monetary conditions and speculative risk in an otherwise stable product type and location. Acquisition Cap Rates are 5% on a reasonably stabilized basis and increase with risk. An empty building with extensive development yields above 10%. Historical nominal appreciation for industrial real estate in Los Angeles is above 10% annualized. Modest leverage provides mid-to-high teen annual returns for stable product over the long run and substantially higher if there is development risk. $5,000,000 to $15,000,000 is the sweet spot which is still below institutional levels but large enough to earn profits.

Creative Industrial buildings are good deals for the following reasons. There is scant know-how to find, reposition and execute, especially in cases where each building needs separate and precise improvements. There is a reasonable profit spread between pre-and-post redevelopment that investors can skillfully capture. Creative districts are exploding in activity with new development reaching billions of dollars of mostly residential construction. Investors receive current yield, long term growth, and stability in excess of what can be found in public markets.

The most common buyers are wealthy individuals by themselves or in partnership. More would invest but access to market data and investments is limited. Searching for deals is greatly improved by having an apparatus to capture current, “on the ground” information. As data science merges with more conventional real estate practice, many creative buildings will undergo rigid analytics for investment potential just like for distribution buildings. Because of the sheer number of possible buildings, every major investor is developing a strong data operation to sort through best deals. For instance, one technique is to use location enabled video and 360 photography to augment traditional real estate data in a scale efficient manner.

The biggest challenge is finding the properties either by personal relationships or some sort of active and deliberate process. So far, for Creative Industrial, there are few large investment organizations with a dedicated acquisitions team as you find in the Distribution sector. Most buildings in the creative space have been too small for large investors to seek and manage. However, because of substantial relative returns, experience in buying and managing thousands of homes with iBuyer algorithms will be applied to Creative Industrial.

Warehouse and distribution remain the dominant industrial building type. However, with most warehouses in only a few hands, the potential to earn ownership income from industrial real estate has shifted to Creative. We are thankful to be in the right location and with the right tools to be at the start of a booming avenue of industrial building investment.

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Please Contact: Jim Klein, SIOR – 310-451-8121

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Los Angeles Industrial: Sales, Leases, Shares, Investments

If you are buying, selling or leasing, today’s industrial real estate business has permanently shifted. It has become an investor led market that was originally established for Occupiers. Investment fundamentals supersede many traditional occupancy concerns. Industrial markets became financialized because of strong and increasing money flows from institutional funds, REITs and private investors. In the New Industrial Real Estate Business, profits accrue fastest to those who treat their buildings like an investment product. The primary market driver is improving income through rental increases, operations, and tenancies. The wave of financialization is affecting most local industrial markets in the best metros and is visible building-by-building. Technical sophistication and specialized platforms are the new means of operating in today’s industrial building business.

Not long ago, Corporates and Owner-Users owned most of the industrial property and the industry revolved around Occupier decisions and corporate strategy.  When investors played a role, it was in support of Occupiers. While institutions, particularly insurance companies, were always significant investors, the Great Recession was an inflection point. Institutional Investors expanded their investments in industrial property to find yield (and income) when most interest rates were at zero. Ten years later, Institutional Investors want even more industrial and they have noticeably increased hiring and investment allocations.  Dynamically, it’s not Occupiers making periodic relocations, but the volume of institutional investment that is moving markets.

Financialization creates generous rewards to find and create income.  We see many large and small platforms infused with intelligence and designed for profit. Substantial investment is being made in data collection, imagery, new tech products, and custom programs.  While there is still a premium for human experience, many processes are being organized for machine intelligence and prediction. As an example, Big Data, Search, Platforms, Geolocation, Visualization, and Content Marketing are now commonly used to find deals and operate property. More than methodology, financialization and enabling technologies are transforming fundamental concepts like value, agency and risk.

Value is determined by income and not how well the building fits a business. With income as the primary measurement, pricing fluctuates based on market and financial variables. Scarcity, rent surges, volatile interest rates, hot money, and other timely events will affect real time value.  Conventional market data, like appraisals or comps, sets limits, but it does not capture the fluctuations within that band that can vary between 10% and 20%. Errors in human behavior during a deal may also add considerable variance. Value investors measure real time signals and capture part of movement in the purchase price. Pricing falls in a range, but value is created by reading signals and applying skill.

Agency is another change.  Traditionally, Agents provide access to markets and develop strategies for positioning, marketing, representation, and advocacy. Agents also bridge common language and cultural barriers between ethnic groups and the space markets. However, big changes are coming to the Agency business, due to financialization and online platforms. When buildings become investment products and can be informally rated, they can be directly traded on platforms amongst experienced buyers, with or without agents.  Space with certain homogenous characteristics are also traded with less friction. On platforms, transaction fees are reduced because conventional broker duties of fiduciary and agency are replaced by electronic trust, certification and experience. Commodification of building investments and rentable space is allowing platforms to grow and requiring agents to adapt.

Investors view risk differently than owner-occupiers.  For example, portfolio investors can take more risk  on any single property than individual owners with their wealth in only a few assets. More importantly, investors invest in tools and personal relationships to reduce risk and increase income. Digital operations, for example, yield analytics, no matter how basic, that measure performance and improve decisions. You can move the odds in your favor with better intelligence and technology. Risk measurement, enabled by advanced analytics, is a new and determining factor in local industrial markets.

Financialization creates an environment with continuous market signals. Signals are seen, measured, and evaluated.  In many ways it’s unfair for individual owners because they lack the same tools or access to information as big investors. But individual owners can reverse the tables with shrewd calculations and turn the tight market to their advantage. In cases of leasing or selling, operating on a carefully designed platform, with market data and transaction capability, will put the odds back in your favor. As industrial markets move from local to national, capabilities extend from the personal to the digital.

Financial fire power and technical sophistication is putting local industrial property in the hands of national and global investors. It’s an unstoppable wave that creates many positive effects through plentiful liquidity and dynamic markets. Competition from investors has made owning your own industrial buildings more difficult, but the ability to invest and operate with less risk has greatly improved. In the New Industrial Real Estate Business, capital and technology are the primary forces moving the markets. While Big Investors and financialization create the momentum, good tools are available for anyone to adapt, participate and succeed.