Lower Expectations, Tempered with Ongoing Demand Mark "Market Review & Forecast" Event
Top
Story
Editor’s Note: This week’s AIRWaves Top Story is the same as in the last issue (February 7th). We are republishing the story in the event some of our members did not get a chance to read the February 7th issue of AIRWaves. |
| Uncertainty and somewhat lower expectations as we emerge from one of the most robust commercial real estate markets ever, tempered with underlying strong demand in several submarkets. |
This was a central theme of a blue ribbon panel of commercial real estate experts addressing the recent 15th Annual “Market Review & Forecast” presented by the AIR Commercial Real Estate Association Jan. 23 at the Jonathan Town Club in Los Angeles. |
Another strong turnout of some 300 people, including media, attended. |
Reflecting AIR’s signature submarket-by-submarket format, varying supply-demand conditions in regions continue to defy generalizations. |
Commenting on the North Los Angeles County submarket, Brad Koehler of Cushman & Wakefield said the area shows a two percent vacancy rate for industrial property, but saw lease rates and sales prices edge down during the final quarter of 2007, while the office sector saw negative absorption for the year. |
Looking at 2008, Koehler sees lease rates for industrial and office properties declining, with land and sales prices falling. |
After a robust first half of 2007 with the average sale price of industrial property jumping to $130.56 per square foot, the Inland Empire, said Michael Chavez of Lee & Associates, Ontario, saw “one of the slowest summers in a long time, and we’re all facing uncertainty about how to look forward.” For 2008, he expects a decrease in user activity, decreases in both lease and sales rates, less new development, longer vacancies and cap rate compression. |
Coming off what he said were an all-time high for lease and sales rates for industrial property with a three percent vacancy in Orange County, Rick Ellison of Cushman & Wakefield, Irvine, said vacancies will rise slightly in 2008, “though I think it will be a soft landing”. Ellison noted that there will be a significant transitioning from manufacturing uses to more of a distribution base. However, he expressed concern over what he called “the flattening” of the container traffic business. He added that because of the lack of construction in the infill markets, the big push in Orange County will be to find “value added” opportunities. |
| A major movement of companies from east to west is benefiting the Eastern submarket, notably the San Gabriel Valley, according to Jason Jamison, principal of GM Properties, Whittier. Noting that William Sonoma recently took 1.1 million square feet of industrial space in a move from Ontario to City of Industry, Jamison said: “These companies are paying more for the space, but high fuel costs and the ability to ship goods more efficiently, influenced their decisions.” For 2008, he sees flattening of vacancy rates “which can’t go much lower at three percent”, flat sale prices, increasing lease and cap rates. |
| Declaring that the industrial sector is shrinking on the Westside, Michael Preiss of The Klabin Company said rental and sales rates for office properties have surged, noting that lease rates increased 20 percent in 2007. |
| “L.A. and the Westside office markets are still perceived as undervalued compared to other major metropolitan areas worldwide, including New York and London,” said Preiss. He reported that there is 4 million square feet of space coming on line, with a distinct trend of movement from the Upper to the Lower Westside. For 2008, Preiss sees the office market remaining stable with moderate leasing activity, a return to a healthier vacancy rate around 9.5 percent, stable rental rates which he said have peaked, increased foreign investment, and continued movement south from the Upper Westside. |
| The downtown L.A. industrial market was strong in 2007 and will continue that way in 2008, according to Bryan Lee of North American Commercial Properties, Los Angeles. “Lease rates rose 5-10 percent and there has been high sales activity, with particularly younger buyers favoring newer concrete tilt-up facilities. “We really don’t have enough buildings to sell with strong demand particularly for strong loading facilities as more importers occupy the district.” Lee added that the conversion of buildings to industrial condos and retail facilities “is catching fire and are typically sold out prior to completion of construction.” Lee said 2008 will see a stable commercial and industrial property market downtown typified by strong owner-user demand notably from the Asian community, and short supply. |
| Focusing on the South Bay submarket, Becky Blair of Blair Commercial, Long Beach, said the industrial market continues strong, citing a 1.4 percent vacancy, largely due to “the positive link to the international trade sector.” She added that office space is also strong because it “represents an affordable alternative as well as a link to international trade. And there’s little new inventory”. In Long Beach, in particular, Blair said developers are looking to demolish office buildings on Ocean Blvd. for hotel and condo development, as well as high rise residential/office. “This space would be filled immediately,” Blair said. |
| Emerging as perhaps the strongest submarket of all, based on comments by Chris Sheehan of Colliers, Torrance, the Mid-Counties area benefits from its popularity for investment, lower vacancy rate, central locale bridging L.A. and Orange Counties and relatively modern product. Sheehan noted that vacancies for the mostly industrial market dropped from 4.6 to 3.79 percent in 2007. “There is very little available land, so we expect a lot of renewals in 2008,” said Sheehan. He said in 2008 he also expects slight increases in vacancies, rents, sales prices, and land prices. “Big investor players are still hot for good product at lower cap rates,” Sheehan said. |
| Click here to view event photos |
A Rare Family of Peers
Member Benefit
Central to the overriding strength of AIR is its very structure. At the heart of this is the fact that AIR is governed by a 20-member Board of Directors, all of whom are active commercial real estate brokers in various markets throughout Southern California. This means that all decisions affecting members are made from the perspective of commercial brokers. |
| Your Board of Directors meets on the 4th Wednesday of every month. Significantly, because AIR is non-profit, your leaders are more concerned with delivering useful products and services to the membership than with driving profits or returns to shareholders. Moreover, all members of the Board are volunteers. Representing ALL brokers is crucial. Currently, the Board enjoys representation from larger firms, including CB Richard Ellis, Lee & Associates, Cushman & Wakefield, Colliers, and Grubb & Ellis, as well as independents such as Delphi Business Properties, Inc., Blair Commercial, Weil Commercial and Maxner Real Estate. Board members reflect firms that not only differ in size, but are geographically diverse.
|
AIR
Member Deals
Inland Empire
•
interPress Brokers Ink 111,000 Square Foot Sublease
Peter Pistone, president and Danicko (Nico) Dorsey, associate, of Arcadia-based interPres Commercial Realty represented Integrated Distribution & Logistics Direct dba SpExpress in its sublease of a 111,000 square foot distribution facility at 8950 Toronto Ave., Rancho Cucamonga. The 48-month transaction is valued at $2.3 million. Use will be for the distribution of consumer products. Mark Zorn and Tal Siglar of DAUM Commercial Real Estate Services represented the sublessor. Integrated Distribution expands from facilities in San Gabriel Valley and Santa Fe Springs.
• Voit Aids Fleetwood in $21.5 Million Buy
Fleetwood Aluminum Products, Inc. acquired a 207,400 square foot industrial building in Corona for $21.5 million for its new headquarters, reports Walter Frome, senior vice president of Voit Commercial Brokerage, who represented the buyer along with Bill Livesay. Both Frome and Livesay are in Voit’s Irvine office. The building, located at 395 Smitty Way, will be used by Fleetwood for their corporate offices and the manufacturing of aluminum products. The buyer was formerly located in Corona in four separate buildings. Paul Earnhart of Lee & Associates represented Cusumano Smitty Way, LLC, the seller.
Orange County
•
No iPod in This Deal
Pods of Los Angeles, LLC, or Portable on Demand Storage, has signed a six-year lease for a 122,600 square foot industrial building for more than $6 million. The building, located at 1650 N. Kraemer Blvd. in Anaheim, was leased by Pods of Los Angeles, LLC, which will use the building as a north central Orange County warehouse and distribution point. Louis Tomaselli, Mitch Zehner and Mike Hefner of Voit Commercial Brokerage’s Anaheim Metro office represented the lessor, BPG Properties, Ltd. The lessee, Pods of Los Angeles, LLC, was represented by Bill Obregon of CB Richard Ellis.
Eastern Region
• DAUM's Dipre Takes Flight
Pilot Automotive, an automotive parts distribution company, has signed a 40-month $1.3 million lease for a 54,000 square foot industrial facility in City of Industry. The facility will serve as an expansion for Pilot. The concrete tilt-up structure is located at 14835 Salt Lake Ave. in close proximity to the 60, 605, 10 and 5 Freeways. Bob Dipre of DAUM Commercial Real Estate Services represented the lessor, Mercury Plastics Inc. Jim Wang of Dharma Investment Corporation represented Pilot Automotive. .
Bram White's Clients Don't Wonder
Affiliate Profile
Never leave ’em wondering. Bram White, SIOR, makes sure he doesn’t. |
White, a successful 38-year veteran of commercial real estate and executive vice president in the Ventura County office of DAUM Commercial Real Estate Services, has built that success on a strong commitment to integrity and ethics, combined with professional expertise and generous amounts of communication. |
“I’m a strong believer that communication should never lapse, not only with your clients, but among your colleagues. Clients should never wonder ‘what is my broker doing for me’, so I like to constantly update them on the status of projects we’re working on. I also believe in a consultative approach,” White said, “in which I get a fee agreement in writing (as required by California law) and then focus solely on the client’s objectives. When you do that, the commissions will follow as a by-product.” |
White clearly speaks from experience. He began his career in downtown Los Angeles in 1969 and joined what was then W. H. Daum & Staff in 1974, becoming an AIR member about that time. In fact, he and long-time friend Michael Collins (a DAUM colleague at the time) collaborated to get DAUM into the AIR MULTIPLE 30 years ago. |
Today White is a principal of DAUM and serves on its Board of Directors. He served as president and CEO of the firm from 1988-1991. He has been an SIOR for 20 years and is one of only two industrial SIORs in all of Ventura County. A leader in AIR, White served as the 1984 president of the Association. |
Among White’s major recent transactions was his representation of Technicolor, in conjunction with Roy Longman and Allen Trowbridge of CRESA Partners, and the 2007 sale of the 908,000 square foot Technicolor facility in Camarillo, with Technicolor leasing back 485,000 square feet of the building. The transaction was the largest in DAUM’s 103-year history. |
| In his leisure, White enjoys what he termed his “therapy” – GOLF. He and his wife, Barbara, and their daughters, Jenna, 23 and Lissa, 19, reside in Westlake Village. |
Quick
Bursts And Coming Events
AIR “Orientation” – Friday, March 14, Marriott Downtown L.A. Hotel,
333 S. Figueroa St., Los Angeles. Brandon Burns, orientation
chair; Joseph M. Vargas, education chair, and Charles F. Noble,
MULTIPLE chair, presenting. Registration 8 a.m.; program
8:30 a.m. to Noon.
AIR Forms Seminar - April 21, Marriott Torrance Hotel; 7:30 a.m., Registration & Continental Breakfast, 8:30 a.m.- 5 p.m., Program. Click here to register.
Broker Networking Event - May 28, Home Depot Center, Carson.
Broker Networking Event -October 22, Orange County. The Pacific Club, Newport Beach.
In-House Training - The AIR offers
training for e-MULTIPLE, WinAIR Forms, and AIRMail.
If a group of brokers or staff from your office would
like to have the AIR bring training to you in-house,
contact Martin Vartanian at (213) 687-8777. A number
of firms have already taken advantage of this great
service and been very pleased with the results.
Member Deals and Profiles - As soon as you
close a substantial deal, make sure you give Art Ansoorian
a call. Your deal will be featured in the next issue
of AIRWaves. Also be sure to get your personal bio over
to Art and be a featured member in the newsletter; it's
a great way for everyone to meet fellow members! Call
Art at (805) 653-1648, or email him at artpr@earthlink.net.
We Need Your Photos and Bios –
AIR is in the process of building its database of member
photos and bios. If you would like your photo and bio
to appear on the AIR website at www.airea.com,
please send them via mail or e-mail to Martin,
or if you have questions, call him at (213) 687-8777.
Tech
Tip
WinAIR Forms 2 - Online Demo is available on the AIR Website.
AIR has provided an Online demo featuring some of the major functionality benefits of the WinAIR Forms 2 program. Please click here to view the online demo.
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