The surprise sector of 2020 continues to deliver big paydays. That is the upshot regarding North Los Angeles’ industrial market, which is more than making up for a pandemic-year shortfall in office and retail real estate, according to the new industrial brokerage team at Colliers International.
While David Harding, Matt Dierckman, Greg Geraci and Billy Walk just joined Colliers in January, the team arrives at the Los Angeles-based brokerage with a collective 100 years of experience. And they know the L.A. North market well.
“The year for industrial ended up being very good,” Harding said. “The fourth quarter just continued along.” In general, 2020’s fourth quarter was on par with the previous quarter, the group told the Business Journal, while the second quarter absorbed the brunt of the pandemic’s economic impact.
Given the lows commercial real estate hit from March through May, the team is genuinely surprised by what a rapid and formidable rebound industrial performed.
“There was so much uncertainty, but the e-commerce was accelerating beyond what they ever imagined it would be,” Geraci said. “They all hung in there and did really well. Everybody’s a bit surprised that it got moving again.” Absorption climbed while vacancy dropped, as Colliers statistics support. San Fernando Valley vacancy ended at 0.8 percent, compared to 1.6 percent in the third quarter. East San Fernando Valley hovered at 0.9 percent in the final quarter of 2020, compared to the third quarter’s 1.3 percent. In total, the Valley saw 1 million square feet under construction during the quarter — the bulk of it in the East Valley with 998,300 square feet.
“It was the highest the L.A. North industrial market has had in seven years,” Harding said.
“One of the interesting dynamics was so much interest from investors and developers,” he continued, pointing to a flurry of high-profile deals, including Rexford Industrial Realty’s nearly $155 million purchase of Van Nuys Airport Industrial Center.
Low vacancy and low interest rates contributed to the strong performance of industrial.
“Santa Clarita – that was the most interesting market,” Harding said. “The number of transactions was the most that we’ve seen (in that submarket).” Dierckman added that while e-commerce, led by Amazon.com Inc.’s Pac-Man-like voracity for distribution space, was king, entertainment has been starting to make a comeback after being sidelined in the earliest days of the pandemic.
“The filming up there (in Santa Clarita) has really exploded,” Dierckman said. “TriScenic Production Services gobbled up hundreds of thousands of feet in the last two quarters.” Filming with safety guidelines compliance has begun with everything from commercials to TV shows to Netflix Inc. specials going into production.
‘Can-do attitude’Walk said that, despite the enforced shutdown, there was no shutting down of industrial users’ “entrepreneurial spirit.” “They still had orders to fill from an industrial standpoint,” Walk said. “Most of the industrial users couldn’t work from home (and so employed) that can-do attitude.” Walk noted that e-commerce was one of the dominant sectors in the fourth quarter, along with cosmetics manufacturing companies.The Colliers team saw one of its biggest fourth-quarter deals unfold in the entertainment sector of the market.
“We were involved on both sides of sale of a $36 million property adjacent to Glendale in L.A.,” Harding said.
That involved a 180,000-square-foot warehouse converted to stages and creative industrial at 4641 Colorado Blvd. “The part of the entertainment industry that lags – the ancillary providers such as the costume guys, prop rental guys, hopefully, it will ramp up and get bigger and bigger,” Walk said.
The team expects more content production ahead in 2021.
Harding recounted how it came to be that he and his former CBRE Group Inc. team started working for Colliers as of Jan. 7.
“We were approached by Colliers,” he said. “They didn’t have a big presence in the L.A. North industrial market.” Their fresh start in January coincided with the beginning of a new presidential administration and the roll-out of coronavirus vaccines.
“We’re very positive about 2021,” Dierckman said.
While the brokers are working from home during the pandemic, they will be operating out of Colliers’ Encino and Glendale offices once the pandemic subsides, Harding said.
For now, the Colliers team will continue doing the hard work and firming up what will in the weeks ahead become the first of their closed transactions for both 2021 and their new host company. “We hit the beginning of the year with the phones ringing,” Harding said. “It’s still early (to tell how strong first quarter 2021 will be), but the momentum of the fourth quarter is only accelerating.”