From Prologis’s 7 Supply Chain Predictions for 2023

1. Prediction #1 – U.S. warehouse development starts will drop to a seven-year low, even as rent growth exceeds 10%.

1. Prediction #2 – California’s barriers to development will permanently constrain logistics demand, allowing Texas to become the #1 state for net absorption.

1. Prediction #3 – Mexico demand will hit a new annual record as near-shoring drives expansion along the border.

1. Prediction #4 – India will rise from fourth to the third-most-active country for development starts, behind the U.S. and China.

1. Prediction #5 – Build-to-suit rents will reach new levels in the U.S. and EU as market rents are capitalized at 5%, despite falling land and construction costs.

1. Prediction #6 – E-commerce leasing will bounce back to become the second-most-active year on record (after 2021).

1. Prediction #7 – Demand for sustainable warehouses will grow rapidly. Installed rooftop solar capacity will double, and EV truck charging capacity will exceed 10 megawatts.

1. Read the whole report here.

Tenant Representation

We’re happy to report another successful lease renewal for a long-term client here in Fullerton, CA on this 91,116 SF Class B industrial property at 1400 Manhattan Avenue.  Here is a copy of the posting I made for this one to give you a flavor of how lease renewals are shaping up when the market is in flux:

“You might wonder what lease renewals look like these days with rates as high as they have ever been. This is a great example. We had to be willing to walk from a fully negotiated lease. We had to be willing to allow the building to go onto the market and roll the dice on whether it would be there later. We had to scour the North Orange County, Mid Counties, and the Inland Empire West. We had to underwrite how we could operate out of two buildings. We had to underwrite what it would look like to operate out of a smaller building along with an Industrial Outdoor Storage site. We had to submit multiple RFPs to the market. We had to leave a second building lease one turn before it was ready to execute.

Then the market slowed. The building wasn’t leasing. We were a few months out. The landlord provided one last significant concession. It was at that moment when we truly understood the value of executing the lease renewal, and it was of real value to us. Valuable to our customers. Valuable to our employees. Valuable to our entire enterprise. So we stepped up, executed the lease within 24 hours, and successfully secured our place to grow for the foreseeable future.”

Landlord Leasing

We are finding that Broker’s Opinions of Values have taken off this past two weeks as industrial investors decide to reprice, go off market or refinance. On the leasing front, we are helping asset managers create strategies for how and when to engage with tenants on lease renewals and upcoming vacancies. We have been monitoring certain assets monthly and can add you to our list for specific assets as you need.

This Thursday, I’ll be speaking at the annual Appraiser Institute, for my third time, at their continuing education forum about the state of industrial real estate in Southern California. I can also share my presentation deck with you.

Investment Sales

We are working with a family office allocating $100 million of capital investment into Class A & B industrial assets across the United States. The focus is on net leased assets of existing industrial property with 5-year minimum lease terms. Please let us know if you have any assets you would like us to consider.

Market Reports

1. Los Angeles County (Market Report)
2. Orange County (Market Report)
3. Inland Empire (Market Report)

Media

1. Book #1
   1. Industrial Intelligence, The Executive’s Guide for Making Informed Commercial Real Estate Decisions
      1. Audible / Audiobook Now Available!
      2. Buy Paperback & Kindle
2. Book #2
   1. Industrial Income, The Investors’s Guide to Maximize the Value in Commercial Real Estate Leases
      1. I’m currently targeting a publishing date of July 1, 2023, and looking for beta readers for advanced copies of the manuscript now. Let me know if you would like to review select excerpts.

1. Podcast
   1. Tim Jemal, CEO, NAIOP SoCal – Tim does an excellent job leading our industry, taking our needs, and translating them into education and advocacy for the community and legislature. Never has the need been so great for the greater community to understand what industrial real estate is and why it is essential to our quality of life. You can listen to this episode now.
   2. Matt Anderson, VP, Cold Summit Development – This will go live within the week and give you insight into the future of cold storage. Please feel free to listen here.
   3. Tim O’Brien, Founder, Rainmaker U – Tim’s specialty is personal branding, productivity, business development, and professional development. Tons of great actionable insights. Please feel free to listen here.
   4. Matt Hargrove, CEO, California Business Property Association – This will go live within the next two weeks and is a fantastic breakdown of all the legislation for 2023 that you should know about as an industrial property owner and user. Coming next week.
   5. Subscribe to the show or listen to individual episodes here

We’d love to catch up with you and brainstorm how we can make your goals come to life.

Best Regards,

Justin Smith, SIOR              Grant LaBounty
jbsmith@leeirvine.com         glabounty@leeirvine.com

Chris Vassilian                     Jeannette Cano
cvassilian@leeirvine.com     jcano@leeirvine.com