Sunday Edition
For me, one graph tells everything you need to know about a market. And that graph is the Absorption, Net Delivery and Vacancy graph by CoStar. Here are the three graphs for the Los Angeles, Inland Empire and Orange County Industrial Markets. You'll notice LA is looking better by the day despite rental rate decrease concerns, the Inland Empire is recovering faster than the news would have you believe and Orange County still has the potential for further correction.
What does this mean for your building, in your market? Write us a quick note and we'll give you the quantitative and qualitative context you need to make an informed decision.
Tenants
Our team was hard at work creating a guide for tenant's to be more knowledgeable in the marketplace and are proud to have it ready for you. It is based off of the 2021release of Industrial Intelligence: The Executive's Guide for Making Informed Commercial Real Estate Decision. You can download a copy of the PDF here and share it with your team. A sample of it is below.
https://mcusercontent.com/1440d60cf1f1d1d149d5b04d3/files/f9d0d5ed-6501-8c79-1e9a-23245ceb6a98/Industrial_Intelligence_Presentation_Read_Only.pdf
Landlords
Don't worry landlord, we also created a guide for you too. It is based off of the 2023 release of Industrial Income: The Investor's Guide for Maximizing the Value of Commercial Real Estate leases. 47 slides jam packed with strategies and tactics to make the most of your industrial property are available for download here. A sample of it is below.
https://mcusercontent.com/1440d60cf1f1d1d149d5b04d3/files/49fc0c66-4d37-156e-7d59-ab76ba65be65/Industrial_Income_Presentation_Read_Only.pdf
Investors
1031 exchange are picking up steam again with a few high net worth investors. Most of the sales are opportunistic situations where sellers are selling property to their current tenants. Others are investors who did a 1031 exchange a few years back and have a tenant with financial difficulty where the lease needs to be renegotiated, the property released, or the property sold. When pivoting to lease or sell the property, we've found success leasing to the franchisor, selling to an owner/user, and selling to a developer to change the use, or re-lease the property. There is a wide variety of outcomes based on the property, the tenant, the basis and the debt.
On a recent survey we did for a client there were 80 single tenant net lease properties available in Southern California in the $2-$4 million dollar range with only 17 completed sales. We're used to helping Southern California investors buy property across the country and have completed deals in 15 different states. Let us know if you have a property you are considering exchanging or one you already exchanged that might be in trouble and need of re-positioning and we'll build out a strategy for your review.
Podcast Episode
I'm happy to share a podcast episode that comes out this week with Eric Ruehle of West Harbor Capital where we discuss Eric's continued ability to grow and thrive in one of the most competitive and efficient markets in the world, the Southern California industrial real estate market.
https://youtu.be/-b6q1BZ3kYo
West Harbor specializes in value-add investments in the Southern California region, with a deal size of $10 to $50 million. Ruehle emphasizes the importance of relationships in the industry and the value of high barriers to entry, such as entitlement and zoning challenges. He also discusses the current state of the capital markets and the leasing market, noting that while there are challenges, long-term trends in the industrial sector remain positive. Eric is a true professional who is sharp as a tack and always provides value. This is a great episode I'm sure you'll enjoy. Look out for it on Industrial Insights on all podcast platforms coming up this Tuesday.
We have also been in the habit or recording team podcasts for you so you can see what we are seeing. This week's update focused on what tenants are talking about. How do I get a warehouse attached to my office space? Why aren't rents going down for me? Should I move for cheaper rent even though I still need the same size? And why are we taking on term onto the end of leases to cover the free rent? Does that mean it is still free? Listening to our associate Chris walk through these will give you further insights.
https://youtu.be/XVnjfelBEHk
Call to Action
Kids are back in school which means it's time for the market to ramp up. With the forecast for rate decreases imminent this should add fuel to the fire, or rather perhaps more accurately more kindling to the flame. Reach out to Grant, Chris, or me to discuss how we can start adding value for you today.
Best Regards,
Justin
Justin Smith, SIOR
jbsmith@lee (mailto:jbsmith@lee-associates.com) irvine.com (mailto:jbsmith@leeirvine.com?subject=Newsletter%20Follow%20Up)
949.400.4786
Charts & visuals
