Southern California Industrial Real Estate Blog

Concrete Ideas Presented at Industrial Lands Workshop in Santa Monica

Concrete Ideas Presented at Industrial Lands Workshop in Santa Monica

Santa Monica residents, developers and business owners have started  hammering out a vision for the city’s “Industrial Lands” that attempted to balance jobs, housing, transportation and open space.  
 “When we look at the Industrial Lands, it is a significant part of the city,” said Eileen Fogarty, Santa Monica’s director of Planning and Community Development. “We are looking at an area more than 400 acres that is a major economic engine and employment center.”
In addition to the post office distribution center, the Big Blue Bus maintenance and repair yards and businesses that serve the city’s auto industry, the Industrial Lands include some of Santa Monica’s largest businesses outside of the hospitality and tourism industries, planning officials said.
The area’s light manufacturing and studio district includes major media and Internet corporations and is home to the Yahoo! Center, Sony Music and the Lantana complex of office buildings that houses production and post-production companies. The Industrial Lands also includes many of Santa Monica’s 1,700 small businesses in the creative arts industries, including the 18th Street Arts Center and Bergamot Station, a complex of art galleries near the City Yards.
The Exposition Light Rail Line slated to travel through the Industrial Lands will likely be a major catalyst in transforming the area.  Scheduled to be completed by 2015, the light rail line proposal features two stations within the city limits — one at Bergamot Station, the other Downtown. Planning Division staff is discussing the possibility of adding a third station at 14th Street, 17th Street or 20th Street.
Developers also are pumping millions of dollars into the area. In the past 12 months, the City has received applications for more than 1,000 residential units, most of them for single room occupancy units that qualify as affordable, although they are expected to fetch more than $1,000 a month in rents.
“The issue here for the community is that amount of residential housing is not the primary purpose of the Industrial Lands,” Fogarty said. “The area does not have the basic nfrastructure for housing.”
After general presentations, participants who met in small groups seemed to agree on a vision for the Industrial Lands that included affordable workforce housing, sustainable transportation, public parks and landscaping and a thriving arts and entertainment sector.
The City could provide incentives for developers to build low-income or middle-income workforce housing for employees of a wide variety of businesses in the M1 and LMSD zones, they concluded.
Santa Monica residents and small business owners cautioned that artists and post-production entertainment professionals cannot afford new housing in the Industrial Lands if those units are sold at market rates.
A second Industrial Lands workshop is planned for a later date. These workshops are part of the Shape the Future 2025 and Motion by the Ocean series to gather public input to update the City’s Land Use and Circulation Elements (LUCE) document.

Info courtesy of Anita Varghese, surfsantamonica.com

MONEY IS FLOWING IN THE INVESTMENT PROPERTY MARKETPLACE
 

“We expect fundamentals to remain basically sound for the commercial sectors,” proudly announced Lawrence Yun, senior economist for the National Association of Realtors. According to NAR’s latest Commercial Real Estate Outlook, the commercial real estate market remains healthy. “The overall office market has been booming, the industrial sector is holding its own, retail is a bit sluggish while apartments are strong with some condo conversions reverting to rental,” he summarized. 
 

Money is flowing in the investment property marketplace. Commercial and multifamily mortgage bankers’ loan originations in the first quarter were up 37 percent from a year ago, according to a survey conducted by the Mortgage Bankers Association. The increase in first-quarter commercial/multifamily lending activity was driven by a 64 percent jump in loans for health care properties, a 62 percent surge in loans for office properties, a 37 percent rise in loans for hotel properties, a 26 percent gain in loans for multifamily, a 25 percent increase in loans for retail properties, and a 14 percent increase in loans for industrial properties.
 

Impressive or scary: The level of commercial/multifamily mortgage debt outstanding grew by 2.5 percent in the first quarter, exceeding $3 trillion for the first time, according to the MBA analysis of the Federal Reserve Board Flow of Funds data. The $3.001 trillion in commercial/multifamily mortgage debt was an increase of $72.4 billion from the fourth quarter of 2006.
 

“Issuers of commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDO) and other asset-backed securities (ABS) were responsible for almost 60 percent of the increase in commercial/multifamily mortgage debt outstanding,” noted Jamie Woodwell, MBA’s senior director of commercial/multifamily research.  ”Looking just at the multifamily market, CMBS, CDO and other ABS issuers were responsible for a full 70 percent of the growth.”
 

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, with more than $1.3 trillion, or 43 percent of the total. Many of the commercial mortgage loans reported by commercial banks are reputed to be “commercial and industrial” loans to which a piece of commercial property has been pledged as collateral. It is the borrower’s business income — not the income derived from the property’s rents and leases — that drives the underwriting, pricing and performance of these loans. Recent MBA research found that among the top 10 commercial real estate bank lenders, 48 percent of their aggregate balance of commercial (non-multifamily) real estate loans were related to owner-occupied properties.
 

Global Homogenization
According to a study released in March by Rreef Research, cap rates are becoming homogenized globally. In 2000, average cap rates on office space in the U.S. were above 8%, while the same rates were below 6% in Europe, according to Rreef. Since then, the large movement of capital into real estate has depressed cap rates worldwide, but also compressed international cap rates into a small zone between 5% and 6%. Rreef notes that Moscow is the only major city today where cap rates soar north of 10% - largely due to perceived risk. Tokyo is the lowest, with cap rates under 4%. The rest of the developed world is between 5% to 6%.
 

Suddenly Southern California doesn’t looks so bad…
 

Industrial Market 
Booming trade continues to bolster the demand for warehouse and distribution facilities across the country, with the strongest demand in coastal markets followed by inland ports and distribution hubs.  There is significant construction of build-to-suit industrial projects, while obsolete structures are being converted to other uses in stronger markets.
 

Vacancy rates in the industrial sector are likely to average 9.3 percent by the fourth quarter, slightly below the 9.4 percent rate at the end of 2006.  Annual rent growth should be 3.0 percent by the end of this year, up from a 1.4 percent annual rise in the fourth quarter of 2006.
 

The areas with the lowest industrial vacancies include Los Angeles; Orange County, Calif.; San Francisco; Tampa; Albuquerque; and Portland, Ore., all with vacancy rates of 5.3 percent or less.  Elsewhere, the slowdown in the automotive industry is hurting some markets.
 

Q1 industrial vacancies measured 8.15 percent, versus 8.11 percent during Q4 and 8.51 percent during the year-ago quarter. Warehouse rents increased by 1.9 percent in Q1, after rising by only 0.4 percent during the fourth quarter of 2006. This left rents up 8.5 percent over the year.
 

First quarter absorption was disappointing, with occupied space increasing by just 27.3 million square feet (msf), compared with 36.9 msf in Q4. Industrial absorption totaled 40.0 msf in 1Q 2006.
 

Net absorption of industrial space in 58 markets tracked will probably total 162.9 million square feet in 2007, down from 202.8 million last year.  Industrial transaction volume in the first four months of 2007 was $11.9 billion, down 13 percent from the same period in 2006.
 

**
 

INDUSTRIAL VACANCY RATES
LOCATION                               Q1′07 VACANCY (%)    Q1′06 VACANCY (%) 
 

 Honolulu, HI                             1.9                                 2.3
Los Angeles, CA                       3.0                                2.8
Bakersfield, CA                         3.4                                3.5
Charleston, SC                          3.8                                6.5
Orange County, CA                   4.0                                4.0
Ft. Lauderdale
/Broward County, FL                  4.2                                3.7
Columbia, SC                            4.2                                0.5
Las Vegas, NV                          4.5                                4.2
Miami, FL                                  4.6                                4.4
Tampa, FL                                 4.7                                4.6
Riverside/San Bernardino
 - Inland Empire, CA                  4.9                                5.4
 Nashville, TN                            5.0                                5.3
Jacksonville, FL                        5.1                                6.2
West Palm Beach, FL                5.5                                4.1
Oakland, CA                              5.6                                5.4
Orlando, FL                               5.6                                6.7
San Francisco Peninsula
- San Mateo, CA                        5.7                                5.5
 Boise, ID                                  5.8                                5.7
Cincinnati, OH                            6.0                                5.9
Reno, NV                                  6.1                                4.9
Fresno, CA                                6.3                                7.6
St. Louis, MO                             6.3                                6.5
Seattle, WA                                6.4                                6.4
 New Jersey - Northern               6.4                                5.9
Indianapolis, IN                          6.4                                6.3
Louisville, KY                            6.6                                6.7
Denver, CO                               6.7                                7.2
Houston, TX                              7.1                                6.6
New Jersey - Central                 7.5                                7.5
Milwaukee, WI                           7.6                                7.7
 San Diego, CA                         7.8                                6.9
Portland, OR                             7.8                                10.4
Kansas City, MO                       7.9                                8.4
Philadelphia, PA                       8.7                                8.7
Cleveland, OH                          8.7                                8.9
Chicago, IL                               8.9                                9.0
Charlotte, NC                            9.2                                9.7
Washington, DC                       9.5                                9.4
Phoenix, AZ                             9.7                                9.0
San Jose/
Silicon Valley, CA                    9.7                                10.0
Dallas-Ft. Worth, TX                 9.9                                10.0
Minneapolis, MN                     9.9                                10.3
Stockton/
San Joaquin County, CA         10.2                                 9.1
Hartford, CT                            10.2                                 8.6
Pleasanton/
Walnut Creek, CA                   10.7                                 8.6
Columbus, OH                       10.9                                10.5
Atlanta, GA                            11.4                                11.8
Sacramento, CA                    11.8                                 11.4
Greenville, SC                      12.6                                  12.8
Detroit, MI                             13.3                                  13.5
Memphis, TN                        14.3                                  14.1
Raleigh, NC                          15.7                                  14.5
Baltimore, MD                       16.9                                  15.2
Little Rock, AR                      17.7                                   9.4
Boston, MA                          22.5                                  21.8
 

Info courtesy of Colliers
**
 

TECHNOLOGY AND THE DEMAND FOR COMMERCIAL REAL ESTATE

Research Brief - TECHNOLOGY AND THE DEMAND FOR COMMERCIAL REAL ESTATE
 

• Technology will be an increasingly important influence on the demand for commercial real estate, especially as tenant demands for different types of building technology evolve.
 

• Technology, as it drives overall growth in the economy, will have a generally positive impact on commercial real estate demand.
 

• The demand for intelligent building attributes will vary both by property type and geographic market.
 

THE STUDY
This study examines how technology affects the demand for commercial real estate in three primary ways: 1) on overall tenant demand by property type; 2) on tenant demand for particular buildings; and 3) on demand for properties by investors. The analysis in this study is based on
interviews and a review of articles, reports and databases addressing technology change and real estate demand.
 

FINDINGS
There are many attributes of an intelligent building. Depending on the intended use of any particular building, these characteristics will vary in importance. The most important attribute, in general across all property types, is the voice and data communications network. Other important
building attributes include energy efficiency, lighting and security.
 

Among the key conclusions of the report are:
 

• Relatively few industrial owners are interested in intelligent building technology and are instead focused on other characteristics that appeal to the widest possible range of tenants.
 

• The demand for intelligent building technologies for office tenants is in its infancy. Other factors such as overall costs and proximity to employees and customers still dominate.
 

• The most important technology attribute for multifamily is highspeed Internet access, while most other technologies are viewed as less important.
 

• Telecommunications and adaptability of space are key features for retail tenants although technologies that improve energy efficiency, security, and lighting can reduce owners’ expenses.
 

• The demand for many technologies is relatively undeveloped for hotel properties although it is generally not too costly to wire hotel rooms for high-speed Internet access.
 

The demand for intelligent building attributes as well as the overall influence of technology on commercial real estate demand will vary by geographic market.
 

Info courtesy of Scott R. Muldavin, The Muldavin Company, Inc.
 

*The complete report is available at www.realtor.org/research.nsf/pages/NatlcenterforRE
 

High Desert next frontier for industrial real estate

Recently Sold 125,000 - 200,000 sqft Industrial Properties in the Los Angeles Area

FASTEST GROWING CITIES BETWEEN 2005 AND 2006

FASTEST GROWING CITIES BETWEEN 2005 AND 2006

     For a discussion of the largest and fastest-growing metro areas, please visit our coverage back on April 9th (http://www.e-edge.org/old-ee/ee070409.htm#4).  (George Huang)

Tejon, Rockefeller Start 600,000 SF

By Bob Howard of GlobeSt.com

http://technorati.com/claim/dzfrkc7mje” rel=”me”>Technorati Profile