Dear Clients, Friends, Partners, & Colleagues
5 STAGES OF REAL ESTATE GRIEF
APRIL 2024 - In the current Southern California warehouse and industrial real estate market, the correlation with the five stages of real estate grief—denial, anger, bargaining, depression, and acceptance—is uncannily apt as we collectively navigate significant shifts in economic conditions, leasing dynamics, and property valuations. The evolving scenario touches everyone involved: property owners, lessors, sellers, tenants, and buyers are finding themselves progressing through these psychological stages as they face a new market and reality.
Denial hit when the first signs of trouble appeared; falling demand, although vacancy rates are at all-time lows, and sliding lease rates were initially dismissed as transient issues. For instance, a client in Anaheim specializing in distribution warehouse development mistook the market, even as warehouses in the area remained on the market for over 250+ days. The initial reaction was to wait for 'the market to bounce back,' believing the decline was just a hiccup.
However, as more data came in showing lease rates diving—some by over 35%—and increased concessions being the new norm, the phase of Anger set in. I remember a property seller in North Orange County expressing frustration over the timing; he believed he timed the market perfectly, but once in escrow at a great sales price, it fell out and now he faced the prospect of low-priced backup offers that seemingly fell overnight. The result was that the property was taken off the market to be marketed another day.
The Bargaining stage is evident when tenants, recognizing their newfound leverage, push for deals that were previously unthinkable. A notable case involved a container company in Los Angeles that negotiated not just reduced rates but effectively kept their costs the same—a scenario almost unheard of just a couple of years prior. Property owners, desperate not to have empty buildings, are willing to acquiesce to these demands.
Depression is perhaps the most challenging stage, reflecting a period where reality sinks in deeply. High-interest rates and subdued economic forecasts mean financing is harder to come by, and growth plans are shelved. During a discussion with a group of investors and developers, the mood was somber as they viewed their future prospects with great uncertainty; while still maintaining a level of optimism.
Ultimately, the market is moving toward Acceptance, recognizing that these changes could be longer-term. Adapting to this new baseline, stakeholders are beginning to recalibrate their strategies. For example, a manufacturing company in Pomona has downsized its operational space to better align costs with current market conditions, finding efficiency, and overall occupancy costs in a smaller footprint.
This acceptance is cultivating a proactive approach among market participants. Now, innovation in contract structuring, creative marketing, brokers engaging and working the market like never before, rate and concession strategies for vacant properties, and enhanced focus on tenant retention are becoming prevalent.
Furthermore, some are finding opportunities in the downturn, such as acquiring undervalued properties or renegotiating existing agreements to more favorable terms.
Each stakeholder's journey through these stages, though fraught with some challenges, also opens avenues for learning, adaptation, and opportunity. The Southern California industrial real estate market, renowned for its resilience, is reshaping itself under these changing but not insurmountable circumstances.
Cheers and go make it happen - let me know if we can assist....
Cameron
DATA DASHBOARDS! - Our team tracks for sale or lease listings ranging from -10K -100k sqft daily and shares this info via our Data Dashboards. These detail Key Performance Indicators for Available For Sale and Lease Warehouse / Industrial property in SoCal. Good Info and Data…
DATA DASHBOARD HIGHLIGHTS:
For Sale
- ~191 Properties for Sale in SoCal
- $356psf Avg Asking Price
- ~5.18m Sqft Available
- 221 Avg Days on Market
- Santa Ana, Santa Fe Springs, Chino, Irvine (top cities for available product)
- 48.2% is 10k -20k Sqft only 23% 20k-30k sqft
For Lease
- ~694 Properties/Spaces Available in SoCal
- ~24.19m Sqft Available
- $1.56 Avg Asking Lease Rate
- ~3.58m Sqft of Sublease space
- 225 Avg Days on Market
CLICK HERE FOR YOUR SPECIFIC MARKET DASHBOARDS
SALE & LEASE COMPS IN SOCAL:
336 E La Palma Ave Anaheim Sold - 46k sqft $17,950,000 ($386psf) - Owner/User Buyer will Occupy (226 days on market)
8 Autry Irvine Sold -18k Sqft $6,970,000.00 ($388psf) (263 days on market) Owner /User Buyer
13595 12th St Chino Sold - 33k Sqft $5,800,000 ($170psf)
2652 Research Corona- Leased- 45k sqft - ~$1.25psf - Lease Renewal 60 Month term
1260 N Jefferson St Anaheim Leased- 32k Sqft (3 ac parcel) $.52 psf (on land) (500 days on market)
1521 Pomona Corona- Leased- 21k sqft ~$1.32psf - $.14 net fees - (237 days on market)
VALUE DEALS IN SOCAL: (IN MY OPINION) FOR LEASE & SALE
COMING SOON - CORONA - INDUSTRIAL NET LEASED INVESTMENT ~30K Sqft - $540K of NOI (trade in 6% cap range) - 5 year lease term with options, quality building in A+ Corona location. Great 1031 exchange or stablized investment opportunity. Reach out for more Details
14 Longitude Way Corona - For Lease - 78k, $.99psf Net $.29 net fees- Brand New State of the Art Construction 9 DH doors 1600k amps power, ESFR System; Reach out if interested
5450 Dodds Ave Buena Park - For Lease - 62k sqft $1.15psf Gross - Mid Counties location, great access 5 & 91 Fwy Gated & Secured Yard; Reach out if interested
1137 W Bradford Corona - For Lease - 22k Sqft - estimated $1.45 psf gross ±1.22 Acre Site / Corner Location Large Drive Around Yard Two (2) Position True DH Doors
330 Myers St Riverside - For Sale-36k Sqft $8.995m ($245psf) Contractor's Yard Oversized Private Fenced Yard Adjacent to 91 Freeway; Reach out if interested
OPPORTUNITIES: Seller Financing Strategies and 1031 Exchanges
Unlocking the Power of Seller Financing: How Motivated Sellers and Buyers Can Seamlessly Close Deals and Optimize Tax Benefits with 1031 Exchange