The obvious takeaway from the commercial real estate market is that this year trumps last year.Last year, the emergence of the coronavirus drove the market down; now the virus’ partial retreat has buoyed activity.“Industrial and multifamily have been the darlings (of the second quarter),” said Jim Markel, vice president and regional manager of Marcus & Millichap Inc.
in Encino. “There is a return to safety to net lease and cap rate compression.”At the halfway point, 2021 has proven much stronger compared to last year, as second quarter data shows.“The market is strong,” Markel said. “Our transaction volume is almost double what it was last year. All of my product categories are trending up from last year — office, self-storage, land, multifamily, retail.”The driver of these exchanges, Markel explained, is that “people are either leaving the state or facing retirement” and so are selling off properties.“The office market is pretty weak now,” said Yair Haimoff, leader of Spectrum Commercial Real Estate. “Some companies are moving from multilevel structures to lower-level offices. The smaller tenants, they’re still around. There’s a lot of activity on the smaller side.”That said, Haimoff was able to make some formidable transactions in Valencia, where in one building alone at 28494 Westinghouse Place in Valencia, six deals were closed spanning 1,000 to 3,000 square feet. Spectrum Commercial Real Estate also negotiated two leases for the fully leased 24733 Turney Road and four leases at 27772 Lyons Ave.Industrial enduranceIn the North Los Angeles commercial real estate industry, industrial continues to be the rock star sector.
Both sales and leasing has been very healthy. Deals during the quarter include a 28,000-square-foot lease at Van Nuys Industrial Center, which Newmark brokered on behalf of landlord Rexford Industrial Realty while Marc Bretter of Cresa represented the tenant.“This is the ninth transaction we’ve completed with Rexford Industrial since they acquired the business park in December 2020,” said Jeff Abraham, one of the Newmark agents involved in the lease.Industrial specialist Billy Walk, senior vice president of greater Los Angeles at Colliers International’s Glendale office, noted how “the market is way, way up.” In fact, Walk added, “this year one of the best years of the decade. We will very likely surpass (every year in the last decade).”Colliers data industrial vacancy in the Valley at 0.7 percent, with the central part of the Valley at just 0.2 percent. In contrast, the office vacancy increased during the quarter to 17.7 percent, slightly better than L.A. County’s overall vacancy of 18 percent, according to Colliers.Walk identified the parts of the Valley wherein industrial sites have been bustling.“Van Nuys has been busy, North Hollywood … Chatsworth a little quieter,” he said. “These investors will pay incredible numbers.”Walk said that such concerns as a possible eradication of the 1031 exchange and worries about bills to increase taxes on industrial properties have driven sales.“A lot of older owners feel that now is a good time to sell,” Walk said.
Bart Reinhard, an industrial agent for JLL working the North Los Angeles region, said that the biggest challenge in selling warehouses right now comes from finding buildings that are more than 50,000 square feet.“There are more tenants than there are buildings,” Reinhard said. “With the buildings of quality, it’s highly competitive right now. There are multiple offers. Many times now, the landlords are leasing it for more than the asking rate.”Silver screen liningThe pandemic stopped film and television production, but the studios are back in market again, as are all of the ancillary services that serve content creation,” Reinhard said.Colliers’ Walk agreed.“The entertainment industry was really quiet during the pandemic but now they have totally roared back to life,” Walk said. “A third of the deals end up being entertainment.”Walk transacted two second-quarter deals that illustrates his point: The sale of 4646 Los Angeles Ave. in Simi Valley, which was acquired for nearly $6 million by events planning business Pico Party Rentals; and 12723 Wentworth St. in Pacoima, which was leased to a large studio user. Walk said both deals “had multiple offers on the table.”
Hot Industrial Market Heats Up More in Quarter
