With $4.8 billion in industrial sales, 2020 was the second busiest year on record for sales volume in the L.A. metro region, according to Newmark Group’s Bret Hardy.
“Industrial has proven to be one of the most if not the most resilient of the asset classes that we’ve had in 2020 during this pandemic,” Hardy said. “It’s considered to be a less risky asset class.”
Chase MacLeod of Stream Realty Partners said there was a slight pause on sales just after the pandemic began, but by the summer, properties were moving quickly.
“The demand actually got greater than it was before the lockdown,” he said. “Southern California industrial real estate is incredibly difficult to come by to begin with. Demand from users increased, and vacancy was low.”
CBRE Group Inc.’s Barbara Perrier said industrial has become “the darling of the commercial real estate world.”
“I’ve been doing this for 33 years, and we finally feel like we’re the belle of the ball,” she said, adding that the pandemic accelerated the growth of ecommerce, necessitating industrial growth to deal with increased demand.
Some companies are looking at doing more manufacturing in the United States, also increasing industrial demand, according to Perrier.
“What we’ve seen in industrial is a ton of rent growth, and that’s because of demand and low vacancy rates. Right now we’re seeing more rent growth than we had in previous times,” Perrier said.
One of the industry’s clear winners was Brentwood-based Rexford Industrial Realty Inc. The company, which operates exclusively in Southern California, recorded more than $1.1 billion in acquisitions last year. Of Rexford’s 2020 deals, 70-80% were off-market transactions.
Big portfolio deals
Big portfolio deals
Kenneth Fields, a partner at law firm Greenberg Glusker Fields Claman & Machtinger, said the number of deals that closed this year was similar to previous years, but deal sizes were larger.
“We’re seeing more portfolio transactions this year,” he said.
Dean Foods Co., for instance, sold more than 40 properties to Dairy Farmers of America in a $433 million sale. The sale included two properties in the City of Industry.
And Blackstone Real Estate Income Trust Inc. purchased a portfolio of 13 industrial properties from Iron Mountain Inc. in a sale-leaseback transaction for $358 million. It included a property in Irwindale.
Companies like Rexford have maintained a steady presence in Southern California’s industrial landscape for years. Now other investors are looking for a piece of the industrial real estate pie.
“Southern California in general has attracted a lot of investment attention from investors both locally, regionally and around the country,” MacLeod said.
“They are looking at industrial as a safe haven for investment,” Hardy said.
“(I’m) seeing a lot of different investors migrate to industrial,” Perrier added. “There’s more money chasing industrial deals than there are deals.”
Hardy added that there is only a moderate amount of new construction. Because there is a limited supply, properties are especially valuable, especially newer buildings.
A bright future
A bright future
“The pandemic has put a lot of strain on the cash flow of certain companies,” Hardy said. “Some need the working capital to survive.”
Hardy added that some business and property owners see the high prices their buildings could fetch as a way to get money and grow their companies.
Fields said he was currently working on a handful of sale-leasebacks.
“My impression is that some business operators that are cash constrained but asset rich are looking to change their balance sheets and access some cash value in their assets.”
Next year, experts expect to see even more sale-leasebacks, increased demand for food and cold storage properties, and more investors in the industrial game.
“It’s going to be another great year,” Perrier said. “The fundamentals are strong and we have low vacancies. We are optimistic that it is going to be a good year.
Top 10 Industrial Sales of 2020
1. Dean Foods Portfolio
Addresses: 17851 Railroad St. and 17637 E. Valley Blvd. were two of the assets sold.
Sale Price: $433 million
Dean Foods Co. sold two properties in the City of Industry as part of a larger portfolio sale.
2. 13 Building Portfolio
Seller: Iron Mountain Inc.
Address: 5086 4th St., Irwindale
Sale Price: $358 million
Blackstone purchased 13 industrial properties. Iron Mountain is leasing back the properties.
3. Gateway Pointe
Seller: Washington Capital Management Inc.
Addresses: 3963, 3931, 3735 and 3629 Workman Mill Road, Whittier
Sale Price: $296.6 million
Brentwood-based Rexford Industrial Realty Inc. purchased the four-building industrial campus.
4. 12 Park Portfolio
Seller: IAC Properties
Addresses: 14043 Stage Road, 10606-10618 Bloomfield Ave., 12839 E. Florence Ave., 3080 I-20, 12633 Clark St., 10715 Shoemaker Ave., 14063-14069 Stage Road, 12981 Florence Ave., 14051-14055 Stage Road, 12636 Clark St., Santa Fe Springs
Sale Price: $280.2 million
PGIM Real Estate purchased a 40% stake in a 12-park industrial portfolio, which included a number of buildings in Santa Fe Springs.
5. Portfolio of 25 properties
Seller: Ruby Group Cos.
Address: 25 properties in Southern California
Sale Price: $203.2 million
Brentwood-based Rexford Industrial Realty Inc. purchased a portfolio of 25 properties in Southern California.
6. 10 Property Portfolio
Seller: Dedeaux Properties
Address: 10 properties in California
Sale Price: $192.2 million
Santa Monica-based Dedeaux Properties recapitalized a 10-asset portfolio, bringing Stockbridge Capital Group in as a partner for the portfolio.
7. Van Nuys Airport Industrial Center
Seller: An individual
Address: 16300 Stagg St., Van Nuys
Sale Price: $154.6 million
Rexford Industrial Realty Inc. purchased a portfolio of 18 industrial buildings in Van Nuys.
8. MillerCoors Brewery
Seller: Molson Coors Beverage Co.
Address: 15801 E. 1st St., Irwindale
Sale Price: $150 million
An industrial food processing building in Irwindale was sold.
9. Vernon Portfolio
Seller: Gautier Land Co.
Addresses: 1921-1931 E. 27th St., 2011-2025 E. 27th St., 2031-2099 E. 27th St., 2034-2040 E. 27th St., 2750 S. Alameda St. and 2800-2840 S. Alameda St.
Sale Price: $93.8 million
Brentwood-based Rexford Industrial Realty Inc. purchased a six-building industrial portfolio in Vernon.
10. L3 Communications – Ocean Systems
Seller: L3Harris Technologies Inc.
Address: 15825 Roxford St., Sylmar
Sale Price: $92 million
An industrial site in Sylmar was purchased for land value only. The buyer plans to construct a new building on the property.
