BRETT DEDEAUX
Title: Principal
Company: Dedeaux Properties
Projects: Dedeaux’s company sold seven new buildings at 801-821 Echelon Court in the City of Industry to seven separate buyers for about $50 million. Earlier this year, the company sold a 266,400-square-foot cold storage facility in at 2652 Long Beach Ave. in Vernon for $57.8 million, or about $217 per square foot.
How has Dedeaux Properties contributed to the current state of the local industrial real estate market?
We determined that more than 50 percent of millennials were ordering groceries online. As a result, there was going to be a growing demand for cold-storage facilities strategically located in in-fill markets throughout Los Angeles. Over the past several years, we have developed and repositioned several cold-storage properties which are now quite a bit more valuable as institutions and related investors have recognized their strategic importance and value. The same is to be said for last-mile logistics facilities.
How long is this latest real estate boom expected to last?
Overall, we are planning for the next few years to remain healthy based on current market demands, lack of inventory, trends in e-commerce, a strong and diverse local economy, etc.
How would you characterize the difference between the local industrial real estate market before and after the Great Recession?
The Southern California market performed reasonably well in comparison to most U.S. markets during the recession. We were definitely the first out of the recession with building new product and achieving strong absorption. That caught the eye of large U.S. and international investors and got the L.A. area squarely on their radar for investment. As a result, there is more competition for industrial assets, which has driven up pricing and compressed cap rates.
BARBARA EMMONS PERRIER
Title: Vice chairman
Company: CBRE Group Inc.
Project: Perrier helped represent both sides in a $57.8 million, or $217 per square foot, purchase by LBA Realty of the Los Angeles Food Center, 2652 Long Beach Ave. in Vernon.
How has L.A. County’s industrial real estate market – and perceptions of it – changed since you began your career?
For one, demand for industrial real estate has never been greater. Industrial property in Southern California, particularly the Greater Los Angeles area, is the most desired product class and location within the nation. All major investors and institutions want to be in the industrial logistics market here. Land prices have escalated to all-time highs, and there is a lack of Class A buildings, especially in infill locations. E-commerce is driving much of the demand.
What are the biggest challenges facing the local industrial real estate market going forward?
The lack of available product is certainly at the top of the list. Some of the biggest challenges are centered around entitlements.
One of this year’s noteworthy deals was the $57.8 million sale of a cold storage facility at 2652 Long Beach Ave. in Vernon. What does this deal say about that industry in L.A.?
Food and cold storage are industrial product types that are becoming in vogue. Previously, it was hard to get groups interested, but now, buoyed by the expanding food industry – think population growth particularly in metro areas, the continued demand for frozen food, the change of consumer consumption habits, and the demand from the evolving ‘food halls’ concept – it has become much more popular.
ZAC SAKOWSKI
Title: Executive vice president
Company: Jones Lang LaSalle Inc.
Project: One of the brokers who represented Liberty Property Trust, which bought the 400,000-square-foot Randolph Business Center in Commerce for $92.7 million, or nearly $232 per square foot, from CalPERS and Seattle firm Bentall Kennedy.
What impact will this project have on the local industrial real estate market?
Valuations for existing, strategically located Class A assets will be impacted because land values and rising construction costs are making them nearly irreplaceable. The impact is specific to valuations in it proved there is a strong market for big box Class A space. This property was built in 2012 and was fully leased and stabilized.
What are the biggest challenges facing L.A. County’s industrial real estate market?
Restricted availability – given the nature of the market (land-locked, limited construction opportunities to deliver new supply) – is the biggest challenge. Rents will continue to jump until there’s a reason for tenants and companies not to be in L.A. Given the e-commerce movement, service delivery time has become more and more important. I definitely see tenants’ willingness to pay for quality space and strategic locations will continue to fuel the marketplace.
ROBERT THORNBURGH
Title: Executive vice president, partner
Company: Kidder Mathews
Project: Thornburgh, along with fellow Kidder Mathews brokers Tom Holland and Jon Reno, helped sell the Downey Industrial Center, a 29-acre property at 9400 Hall Road in Downey, for nearly $48 million to Prologis Inc., a San Francisco-based real estate investment trust.
How has L.A. County’s industrial real estate market – and perceptions of it – changed since you began your career?
The recent transformation of retail is the result of a steadily growing economy and population base who are demanding more products, from industries like construction, food and beverage to household items, all of which are on the rise.
Thriving small business owners have also played a substantial role in the increased use of warehouse and distribution space.
What brought you to the Downey Industrial Center project/deal?
Our team has been involved with the Downey project for over 20 years, directly overseeing both the day to day property management and leasing. After a thorough review of various factors, the ownership – many who were nearing retirement – felt it was time to take advantage of current market conditions and sell the asset.
RUSTY SMITH and
STEVE BOHANNON
Titles: Senior Directors
Company: Cushman & Wakefield
Project: The sale of Bridge Point South Bay, a 512,000-square-foot new building at 20333 Normandie Ave. near Torrance, to a Morgan Stanley Group Inc. real estate fund. Nordstrom Inc. leased the entire building.
What brought you to the 20333 Normandie Ave. project?
Smith:
We put together a great team of brokers, our amazing in-house marketing staff led by Erin Bruner designed a great marketing plan to sell the facility, and we won the assignment. Bridge Development did a fantastic job on the building; nearing the end of the construction Morgan Stanley purchased the building and we were able to secure a great, long-term tenant just prior to the building construction being finalized.
How long is this latest real estate boom expected to last?
Smith:
All signs are pointing to continued growth in this cycle and especially in our market.
Bohannon:
It appears as if we have a solid 12-18 months left in this cycle. I won’t be surprised if it lasts another six months or 36 months.
How would you characterize the difference between the local industrial real estate market before and after the Great Recession?
Smith:
Clients that we work with do more diligence prior to leasing a new facility, confirming cost like drayage, labor and taxes. As the market was recovering we saw many tenants also have a flight to quality (moving from a Class “B” buildings to a Class “A”) for virtually the same price they were paying for lesser quality. This also allowed for tenants to get more efficient for cost savings. Now that we are further in the cycle and there are less available options, tenants are looking for other ways to cut costs.
Bohannon:
I considered the pre-Great Recession a very hyper market. We were experiencing pricing thresholds on lease rates, sale prices, land prices that we had never seen. Now, we have blown past previous record highs into uncharted territory. We are pre-recession pricing on steroids.
