The commercial real estate market hasn’t stopped since stay-at-home orders were enacted in Los Angeles and the rest of California in mid-March.
But it has slowed dramatically.
“We have seen sale numbers across the board drop like I have not seen before,” said Jack Livingston, a research analyst at Avison Young.
While there have still been some sizable sales during this period, Livingston said, most of those were in the works prior to the pandemic.
“May and June are the true post-Covid deals. Everything else started pre-Covid,” said Kevin Shannon, co-head of U.S. capital markets at Newmark Knight Frank. “May and June — it’s not pretty.”
In May $332 million of retail, office, industrial and apartment products sold in Los Angeles County, according to NKF data. That’s far below the $1.66 billion in sales last May.
Many of the deals that were completed post-Covid, Shannon added, were exchange buyer deals where sellers “have tax reasons to buy.”
Several recent sales were portfolio transactions. Air Products and Chemicals Inc., for instance, purchased a portfolio of five steam methane reformer hydrogen plants, including a site in Torrance, for $530 million.
Dairy Farmers of America purchased a $433 million industrial portfolio, which included two properties in the City of Industry, from Dean Foods Co.
Patrick Soon-Shiong, one of the richest men in L.A., purchased the St. Vincent Medical Center and adjacent buildings for $135 million.
Meanwhile, Brookfield Asset Management Inc. purchased two industrial buildings in Carson for $63.6 million in a sale-leaseback transaction.
The biggest multifamily sales during the coronavirus lockdown were a leasehold interest in the 438-unit One Santa Fe downtown and a recapitalization of a leasehold interest in the 449-unit Wilshire Vermont in Koreatown. Experts do not expect to see leasehold interest deals become a trend, though.
Iconic properties including The Forum and AES’s plant in Redondo Beach have sold since the stay-at-home order was announced — for $400 million and $150 million, respectively.
Pasadena also saw some big sales with the three-building Pasadena Corporate Park selling for $78 million and a 15,000-square-foot office building at 101 S. Marengo Ave. selling for $72 million.
Shannon said the same markets that were popular before Covid-19 remain popular today.
“Capital wants safety,” he said. “The deals that are going to come out are deals that have weighted average lease term and credit and lower risk.”
Avison Young’s Livingston agreed.
“We’re going to see the Westside remain a hotbed of activity down to El Segundo, where there’s a lot of tech and aerospace activity,” he said.
Betting on industrial
Experts say that industrial remains the most in-demand product type in the market.
“Industrial is going to lead us out of it,” Shannon said. “You will see a lot of industrial trade.”
Shannon said many companies are looking at keeping larger amounts of inventory on hand and that some businesses will likely bring some manufacturing back to the United States, all benefiting industrial real estate.
Since March, Livingston added, roughly 18 million square feet of industrial real estate sold in L.A. County. That’s up from about 15 million square feet during the same period in 2019.
While that increase was driven by more buyers acquiring warehouse space, it’s not all good news.
“The transaction volume did not necessarily reflect more square feet being sold in the market,” he said.
Shannon added that the debt market bottomed out in May, and its rebound would help with deals.
The other product type doing well now is medical office buildings. Quite a few medical buildings have sold since Covid-19 arrived, Shannon said, adding that overall sales would start to rebound later this year.
Top Real Estate Sales in L.A. County Since the Stay-at-Home Order Was Announced
1. Hydrogen Plant Portfolio
A portfolio of five steam methane reformer hydrogen plants in California and Delaware, including a facility in Torrance, sold for $530 million.
Address: 3700 W. 190th St. in Torrance (local part of the sale)
Buyer: Air Products and Chemicals Inc.
Seller: PBF Energy
Price: $530 million
2. Dairy Portfolio
Two industrial properties with ties to the dairy industry in the City of Industry sold as part of a larger $433 million portfolio sale.
Address: 17851 Railroad St. and 17637 E. Valley Blvd., City of Industry (local part of the sale)
Buyer: Dairy Farmers of America
Seller: Dean Foods Co.
Price: $433 million
3. The Forum
Los Angeles Clippers owner Steve Ballmer purchased The Forum in Inglewood.
Address: 3900 W. Manchester Blvd., Inglewood
Buyer: Steve Ballmer
Seller: Madison Square Garden Inc.
Price: $400 million
4. One Santa Fe
A leasehold interest sold for downtown’s One Santa Fe Apartments. The 438-unit building has 81,000 square feet of retail.
Address: 300 S. Santa Fe Ave.
Buyer: Public Sector Pension Investment Board
SellerS: Berkshire Property Advisors and Hearthstone Housing Foundation
Price: $175.5 million
5. AES Plant
AES Corp. sold a 51-acre coastline power plant site in Redondo Beach.
ADDRESS: 1100 N. Harbor Drive, Redondo Beach
BUYER: Leonid Pustilnikov
SELLER: AES Corp.
Price: $150 million
6. Wilshire Vermont
Klein Financial Corp. brought in a new joint venture partner, recapitalizing the 449-unit Wilshire Vermont. Divco West Real Estate Services Inc. replaced Hearthstone Housing Foundation and CalPers. It was a leasehold interest.
Address: 3183 Wilshire Blvd.
Price: $135 million
7. St. Vincent Medical Center
Patrick Soon-Shiong purchased the St. Vincent Medical Center and adjacent buildings.
Address: 2131 W. 3rd St., 201 S. Alvarado St., 2200 W. 3rd St., 262 S. Lake St., 143 S. Alvarado St., Westlake
Buyer: Patrick Soon-Shiong
Seller: Verity Health System
Price: $135 million
8. Pasadena Corporate Park
A trust purchased a three-building, nearly 267,000-square-foot corporate park in Pasadena.
Address: 3453-3455, 3465 and 3475 E. Foothill Blvd., Pasadena
Buyer: Cherng Family Trust
Seller: Columbia Property Trust
Price: $78 million
9. 101 S. Marengo Ave.
A vacant 315,000-square-foot office building sold in Pasadena.
Address: 101 S. Marengo Ave., Pasadena
Buyer: Atlas Capital Group
SellerS: Woodridge Capital Partners and RBZ
Price: $72 million
10. Carson Industrial Portfolio
Two industrial buildings in Carson sold in a sale-leaseback transaction.
Address: 2001 E. Dominguez St. and 20740-20750 S. Wilmington Ave., Carson
Buyer: Brookfield Asset Management Inc.
Seller: Western Tube & Conduit Corp.
Price: $63.6 million
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