Southern California's warehouse and industrial real estate, where there are a ton of options, rapid growth, and a promising future, so let's focus on the future—more precisely, 2024.

The year ahead holds a fascinatingly dynamic blend of opportunities and surprises that will certainly not be similar to the last several years for the industrial real estate market.

It's not just about the trends here; it's also about realizing the potential these trends hold, how they will affect the nature of warehouse and industrial real estate, the investment climate, and how you, as a tenant, property owner, or investor, may profit from them, avoid misteps, or make business decisions that will impact you.

Fasten your seatbelts, because it's time to explore the thriving field and predictions for warehouse and industrial real estate in 2024.

  • Lease Rates and Sales Prices Will Stay the Same or Increase:  Yes, lease rates and sales prices are not going to see significant reductions in '24.  Why?  We have no product available, especially in 10k–100k sqft size segments; there is no DEBT BOMB, and owners have patience and lots of cash.  So if you are a property owner or investor, know that lease rates should remain relatively stable for quality product in well-located areas.  If you are a tenant looking for new space or renewing your lease, your best move would be to budget for at least a 100%+ increase in rent costs or start looking to relocate to save money....NOTE: there will be some rate and price adjustments or concessions for Class B/C product and locations vs Class A product and locations will maintain or hold pricing.
  • Industrial Land Sales will be Effectively DEAD:  Over the past 5-7 years, institutional developers or buyers have acquired the majority of land sale transactions.  They were setting the market price and effectively increasing the price due to intense competition for land options.  They are all but gone now, or at least have adjusted their appetite based on the realities and costs of the market.  Expect more of the same in '24.  See image
  • Tenants and businesses will be chasing value to lower occupancy costs:  It is expensive to operate in SoCal, plain and simple. Tenants and their businesses are facing challenges as a result of the over 100%—150%+—increase in lease rates over the past several years.  Many have not budgeted for them, and they are shocked at the increases and the impact on their P&L.  However, tenants are not going to sit back and let it happen to them; they will be seeking value in lower rents, downsizing, moving to less than Class A product or locations, shorter lease terms, lease concessions, etc.  Owners should be advised to understand their tenants financials, the impacts of the new rent rate, etc., and do what they can to manage this financial situation. 
  • Prop 19 the Sinister Inheritance Tax will distrupt or destroy estate planning:  Most are unaware of this lurking property tax increase that can have a devastating impact on property value and to inheritors, their businesses, which may occupy the property, or their tenants.  Property taxes could increase by $100's of thousands of dollars per year, instantly. Trillions of dollars of real estate assets will transfer over the next few years, and many will be struck with some tough decisions about whether to sell or pay the tax, in '24 and beyond.  Want to learn more about Prop 19 visit:  Prop 19 The Sinister Property Tax

Reduced Interest rates will have little impact on Deal velocity.  24 is an election year; expect to see the administration call for or demand that the fed lower rates.  In doing so, the thought is that the real estate market should "recover" or at least stabilize.  I believe that there is a significant amount of price discovery (pricing realization by buyers or price reductions by sellers) that needs to settle out.  However, there will be sellers who achieve awesome prices and buyers who will be willing to pay that price.  So if you want or need to Buy or Sell '24 is still a great year to consider doing so.

Cheers to '24 - Cameron

Want to learn more about these predictions and other important and value creation ideas? Consider attending the SVNFORUM24 - 02/22/2024 - Join other owners, investors, tenants of warehouse | industrial real estate. 

Event Details and Sign Up Visit SVNFORUM24