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Wednesday, Aug 10, 2022
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Industrial Transactions Sustain Brokerage Firms

Brokerages in San Fernando Valley commercial real estate affirm steady and resilient growth across the industry’s various sectors, with certain sectors – particularly industrial properties – bolstered in the past year despite the pandemic.

Chris Jackson, co-chief executive of the recently restructured NAI Capital, explained how the company bounced back quickly amid the pandemic after its employees bought the company. NAI ranks No. 3 on the Business Journal’s list of Commercial Real Estate Brokerage Firms.

“We bought the company back in October 2020. NAI Capital has been around for 40 years, but we had new ownership plus we were in the midst of the COVID pandemic.  Therefore, the first couple months of 2020, the first quarter, was a little rough – as it was for everybody. However, then we saw from the second quarter to fourth quarter things really picked up once everybody saw that the world was not coming to end,” Jackson said.

While office and retail real estate were affected, Jackson highlighted the other sectors which comprise NAI’s commercial real estate business. 

“We also do investments, industrial and multifamily which carried us through COVID because those industries were the strongest,” he said. And now with retail and office coming back, “the industry seems to be on all cylinders,” Jackson added.

Jodie Poirier, executive managing director and greater Los Angeles market leader at Colliers International, stated that overall retail stood strong and has bounced back. Colliers is No. 11 on the list.

“Despite talk of the decline of retail amidst the negative effects of the pandemic, retail stands firm. The retail industry is in better shape than most people think,” Poirier said. “Keep in mind, while e-commerce is hitting high records, omnichannel consumers shop in-person and at stores. Returns and exchanges provide a means to bolster foot traffic. Relative to the previous year, foot traffic is only down about 10 percent.” 

Industry insiders also report the future of office space as boding well.

“Office is holding its own and there are some bright spots,” said Mike Ruppert, managing director for L.A. North at CBRE Group, the No. 1 brokerage on the list.  “There is quite a bit of adaptives and mixed-use redevelopment opportunities. When I think about L.A. North, entertainment and media is a big driver.”

Moreover, the office sector could get a boost as the pandemic fades.

“The office continues to play a key role facilitating collaboration, company culture, community and events,” Ruppert continued. “We have all experienced our share of Zoom fatigue so to be back in an office with others has been fantastic.” 

Industrial strength

Ruppert, Poirier and Jackson all report recent robust activity growth in the region’s industrial sector.

According to Ruppert, increasing demand for industrial buildings stems from the rapid growth of e-commerce. The need for mass distribution centers correlates with high demand for warehouses and logistical facilities.

Ruppert pointed out constraint on supply and an all-time low on industrial vacancy in the San Fernando Valley region. 

“With limited industrial property supply, it truly is an owner’s market,” Poirier stated.

“Over the last several months, the industrial market continues to boom as many users and tenants alike are on a strategic hunt for adequate space. The industrial market continues to flourish, and while tenants are having a challenging time locating facilities that meet their requirements, landlords have the advantage, thus the rise of rent rates. Asking rents are higher than they’ve ever been. What we are witnessing are more offers on concessions – whether that is through free or discounted rent up to a period or other negotiations to help meet their qualifications,” Poirier explained. 

While the pandemic initially caused a drop in employees coming into the office, Ruppert forecasts the future trend where offices have “more space per employee” in addition to “increased hiring” within a hybrid workforce. 

“Responses to recent surveys show that most companies anticipate supporting a hybrid workforce. Some of this hybrid work will stay with us and will allow employees to work from home some days and work in the office other days,” Ruppert stated.

He envisions traditional office spaces becoming attractive “office destinations,” hotspots and hubs that will provide employees access to colleagues, events, services, technology and more which would otherwise be unavailable if employees were not in the office.

“So, there would be a bit of FOMO (fear of missing out) if a person wasn’t in the office,” Ruppert said with a laugh.

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