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Thursday, Nov 30, 2023

Real Estate—It’s a Seller’s Market for Hard-to-Find Industrial Space

Fueled by the scarce supply of new, smaller facilities and record low interest rates, buyers are grabbing up the few such industrial properties available at lightening speed. Three cases in point in Pacoima: a trio of buildings totaling a combined 87,250 square feet have all sold within months of completion. Leonetti Sunray, a studio lighting company, acquired a 28,250-square-foot facility at 10601 Glenoaks Blvd. for $2.3 million. GER Enterprises, a firm that assembles racecars, acquired a 25,000-square-foot property at 10639 Glenoaks Blvd. for $2.1 million. And another lighting firm, TMB, acquired a 34,000-square-foot building at 10643 Glenoaks Blvd. for $2.55 million. Chase Partners, developers and sellers of the 10601 and 10639 Glenoaks properties, acquired the parcels in 1999 and completed the buildings within the past month, said Brent Weirick, vice president with Colliers Seeley International, which represented buyer and seller in both the deals and also represented Chase in the land sale. The developer of the third property, DKT Partners, acquired the parcel around the same time. “These are smaller, niche sites and the San Fernando Valley is made up of smaller manufacturing and entertainment companies, and that’s why we’ve had success where other projects have been a bit slower to sell,” Weirick said. In the Northeast Valley, vacancy rates for industrial buildings under 50,000 square feet are running at about 1 percent, Weirick added. Leonetti, which is moving from space the company had leased in Sun Valley, is representative of user-buyers that are now entering the real estate market to take advantage of extremely low interest rates. Weirick said interest rates on SBA real estate loans are now running at about 6.5 percent for an adjustable loan with a 10-percent down payment. A year ago, these loans were being offered for about a percentage point more. “The interest rates were a huge catalyst,” Weirick said. “The SBA is driving the small business real estate market.” GER is relocating from Van Nuys where the company occupied about half the space it has just bought. TMB, which had been based in Burbank, initially hoped to remain in that city, close to its entertainment industry clients. But the company chose to move to Pacoima because comparable buildings, with high clearance loading docks and other upgraded features, in Burbank were far more expensive. Weirick also represented DKT in that deal. TMB was represented by Bill Birtell of Beitler Commercial. Troubled Third Quarter Office vacancies in the San Fernando Valley shot way up in the third quarter, exceeding 16 percent for direct and sublet vacancies combined, according to figures just released by Cushman & Wakefield. Although direct vacancy rates held up somewhat better, the levels nonetheless exceeded those at the close of the previous two quarters. The figures are not likely to come as a surprise to brokers, who have seen office leasing activity, light since the beginning of the year, come to a near standstill in recent months. But in the third quarter, even submarkets that had maintained their strength through most of the year showed signs of weakening. In Warner Center, one of the San Fernando Valley’s strongest submarkets, vacancy rates increased to 13.6 percent overall, compared with 9.3 percent in the second quarter of the year, the Cushman & Wakefield report revealed. Sherman Oaks vacancy levels soared to 15.7 percent overall, from 11.8 percent in the previous quarter. And levels in Encino rose to 10.6 percent, from 8 percent in the second quarter. All three submarkets experienced negative net absorption rates (indicating there were more tenants vacating space than leasing it). Warner Center saw absorption rates of negative 35,812 square feet; Sherman Oaks had a negative rate of 43,413 square feet; and Encino had a negative absorption of 25,911 square feet, according to the Cushman & Wakefield data. Calabasas was one of the few areas where vacancies declined over the previous quarter. Overall vacancy levels in the submarket, 10.4 percent, reflected a positive net absorption of 4,135 square feet. In the second quarter of the year, Calabasas’s vacancy rate was 12.3 percent overall. Cascades Deal Cascades Business Park has leased one of the three buildings recently completed in the complex. Brooks Automation, a supplier to the semiconductor industry, has signed a 10-year lease for a 65,804-square-foot building in the Sylmar industrial complex. The deal is valued at $4.5 million. The building is the smallest of three developed in the current phase of the project by Prudential Real Estate Investors and The Hewson Co. Also just completed is a 106,594-square-foot building and one of 200,632 square feet. Greg Geraci and David Harding at CB Richard Ellis represented the tenant. Geraci, along with Barbara Emmons, Greg Barsamian and Scott Wilcott, also of CBRE, represented the landlord. Sun Valley Sale The principal of Entertainment Lighting Services has acquired an industrial building for the company, which services the entertainment industry. The 69,582-square-foot facility sits on three acres at 11440 Sheldon St. in Sun Valley. The purchase price, including an adjoining parking area, was $4.1 million. Bob Hoyer of Delphi Business Properties represented the buyer, John Chuck. The sellers, the estate of Rose Dorfman, Nansee Lanning and Barry Dorfman, were represented by Delphi’s Ross Thomas and Nigel Stout of Grubb & Ellis. Thomas also represented the sellers of the adjacent parcel, George and Nansee Lanning. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at sgarcia@sfvbj.com.

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