In many cases traditional methods of valuation – comps, income, and replacement – are no longer guides for pricing property. Sale prices often exceed most traditional justifications. Properties sell with cap rates that are below mortgage rates so the buyer is already starting in a negative position.
n my past few newsletters I discussed the enormous potential for land. These days, older property is being purchased for the underlying land value. The major impetus is the evolution from single story development to multi-story. Use of air rights increase the value of land in areas that have never experienced mid rise development. The proposition is obvious in dense urban areas like Pasadena, Downtown Los Angeles, Anaheim or West LA; however, mixed use is expanding throughout the entire region.
While many investors complain about a lack of deals and high pricing, others see nothing but opportunity. One difference in perception is risk tolerance. Another is a reluctance to embrace new development models. But I think the biggest factor in the vision discrepancy is the nature of their organizations.
Continue reading “Enterprise Buyers”
When the last few aircraft factories close, we will have witnessed the complete deindustrialization of major plants in Los Angeles. Big steel, auto, tires, and glass are all gone. In their place are retail centers, big box distribution, a smattering of public buildings, and new urbanist housing.
Continue reading “Post Industrial Land Use”
Gardena is on the brink of insolvency because of a failed insurance investment and poor governing. While desperate to right itself, Gardena’s effort points to a generation of bad decisions. As we enter a period of scarce State and Federal resources, cities like Gardena will be even more dependent on their own management abilities.
The value proposition is overwhelming when comparing old, obsolete structures to developing say, a 3-story residential condominium. We often see redevelopment returns of 2 and 3 times compared to what is currently being generated at an older property. All industrial property with a decent location is open to reuse. A growing population, increased densification and worsening traffic mean there is continual opportunity in underutilized property.
Continue reading “Underutilized Sites”
Like its harbors, airports and freeways, the Los Angeles industrial market is becoming clogged. Buildings are scarce and sale pricing is unimaginably high. Land values and constructions costs make it expensive to build new. Meanwhile Seller’s options are limited by capital gains (although relatively low for the moment), lack of suitable replacement properties, and unwieldy ownership structures.
Continue reading “Overcoming Space Scarcity”
The 1 million square foot air freight development in Hawthorne is being delayed, in part, by a threatened lawsuit from neighboring city of Gardena. Interestingly, the city of Hawthorne voted to exclude this one major development from its own moratorium of anti-trucking development.
Continue reading “Politics Of Trucking”
View Los Angeles Industrial Features in a larger map
Industrial property is not going away, but it’s changing. Overall, only the best located properties or those that are adjacent to existing residential will be conversion candidates. Those industrial buildings safely tucked away in M-zoned districts will be protected. Whether there will be productive businesses for the older buildings is another question. The price difference between low-clear industrial and modern distribution space continues to widen.
We have a $3 million dollar project near the 200-acre Goodyear Tract located at Slauson Avenue and Avalon Boulevard.It is one of the older manufacturing centers in Los Angeles. Pricing is roughly 30% lower than other properties along the 110 Corridor. Obsolescence and neighborhood factors are the biggest reasons that you can find rents in the mid-$.20’s and sale prices in the mid-$30’s.There are a lot of lessons here that can apply to other parts of Los Angeles where manufacturing is either disappearing or adapting.