Industrial & Investment Real Estate Brokerage
Perris Industrial Facility Sold for $2M
Hilltop Group Acquires 30,000 SF
October 3, 2014
Magnolia Industrial Park LLC sold the industrial building at 23120 Old Oleander Ave. in Perris, CA to Hilltop Group for $2.03 million, or about $69 per square foot.
The 29,500-square-foot manufacturing facility sits on 6.5 acres in the Riverside County submarket, at the northeast corner of Harvill Ave. It was fully occupied at the time of sale.
Kerry Schimpf of Commercial Properties Group and Andy Melzer with Cassidy Turley represented the seller. Don Archer of NAI Capital Commercial represented the buyer
Rialto Industrial Sells for $4.5M
Storage Facility Changes Hands
October 3, 2014
Michael Giuliano purchased the industrial building at 371 S. Cactus Ave. in Rialto, CA for $4.5 million, or about $38 per square foot.
The single-story industrial building is located on a 5.7-acre parcel and totals 119,440 square feet. Built in 2008, the building will be used for a storage facility, and was 100% vacant at time of sale.
Both parties handled the direct sale in-house.
CalSTRS, Panattoni Dev Co Sell Airport Distribution Center for $20.3M
Rialto, Guthrie Dev Co Acquire 222,000 SF in Ontario
October 13, 2014
< prev 2 of 3 next > Rialto Capital Management LLC and Guthrie Development Company acquired the three-building Airport Distribution Center at 1500 - 1590 Milliken Ave. in Ontario, CA from CalSTRS and Panattoni Development Company for $20.25 million, or approximately $91 per square foot.
The deal totals 222,500 square feet of industrial warehouse space in the Airport Area submarket of San Bernardino County. The buildings were constructed in 2000 and are roughly 74,000 square feet each, and each offer ten dock-high and ten grade-level doors.
Darla Longo, Barbara Emmons, and Michael Kendall of CBRE represented the sellers, while the buyers handled the sale in-house.
Spec Developers Scouring Markets for New Warehouse Sites
With Available Space Tight in Buildings Over 250,000-SF, Developers Looking for Opportunity to Build in Right Place at Right Time
October 15, 2014
After seeing several quarters of robust leasing and little in the way of new construction, developers are buying up land for new projects to support the future growth of the U.S. warehouse and logistics market.
Only 46 warehouse buildings measuring 500,000 square feet or larger were available for lease in major U.S. markets, and many markets lack a single availability, according to a research note by Cantor Fitzgerald, citing research by its Newmark Grubb Knight Frank brokerage affiliate and CoStar data.
Brokers specializing in industrial land report a noticable uptick in land sales by spec developers. At least $1.59 billion in land sales for proposed warehouse, industrial park and light industrial projects closed in the first three quarters of 2014, exceeding the total industrial land sales from last year, and the highest sales volume for industrial land since 2008’s $2.3 billion high water mark, according to preliminary CoStar COMPs sales figures.
The major tenants that drive industrial demand today are largely unable to meet their requirements from existing building stock, setting the stage for a period of heavy development, according to David Toti, REIT analyst with Cantor Fitzgerald.
"We are in the beginning stages today, and believe that there is substantial value creation to be realized by being in the right places at the right time with the right product," Toti said.
About 120 million square feet of industrial space is under construction across the U.S., nearly 53% of which is preleased. The most active markets are, as usual, clustered around the densest and most populous logistics and distribution markets in the country: Dallas, Southern California’s Inland Empire and Los Angeles, Philadelphia, Chicago, Northern New Jersey and Houston.
Editor's note: For a comprehensive look at the U.S. industrial market, register for the CoStar State of the Industrial Market Third-Quarter 2014 Review & Forecast on Oct. 30. CoStar subscribers may log on and click the Knowledge Center tab.
"Logistics construction growth is increasing quickly," remarked Rene Circ, director of U.S. industrial research for CoStar Portfolio Strategy. "While deliveries have not yet ramped up, space under construction rose 60% year-over-year, and nearly 50 million square feet is scheduled for fourth-quarter delivery.
"If none of these projects are delayed, the last quarter of this year will see one of the strongest growth rates for construction on record," Circ said.
Quarterly net absorption has consistently been higher than deliveries, which have remained below the historical average for several years, added Cantor Fitzgerald's Toti in his research note to clients.
Demand growth for smaller light-industrial buildings has actually outstripped demand for large boxes as large logistics tenants wait for new, larger buildings, while smaller tenants are becoming more active in local markets, according to CoStar's Circ.
In addition to the less-than 50 availabilities of higher quality single-tenant bulk warehouse-distribution buildings in major U.S. markets of more than 500,000 square feet, only 162 buildings have blocks of between 250,000 and 500,000 square feet available, according to CoStar data cited by Cantor.
"Overall, the study shows that there is a lack of available supply across the U.S., supporting the growth of development pipelines and delivery of new product into the marketplace," Toti concluded in his analysis.
Industrial real estate market conditions remain characterized by historically low vacancy rates, continued positive absorption and rising rents as leases are renewed and new leases signed.
With the rent growth and strong leasing, industrial REITs appear poised to grow same-store growth in the near term, noted Citi REIT analyst Michael Bilerman in a recent report. Outsized investor demand is forcing down capitalization rates in a competitive transaction market, prompting public REITs to shift their growth focus to development, where companies are achieving attractive yields -- though DCT Industrial (NYSE: DCT) and Prologis (NYSE: PLD) are actively looking to acquire existing properties, Citi said.
Economists Predict Steady CRE Growth Ahead Despite Undercurrents of Global Turmoil
Sobered but Undeterred by Recent Wall Street Woes, ULI Forecasts Three More Years of CRE Growth
October 15, 2014
A consensus survey of economists and analysts convened by the Urban Land Institute and EY Real Estate predicts solid but not spectacutar returns for U.S. real estate investors as moderate economic growth supports a steady strengthening in commercial real estate capital markets and fundamentals over the next three years.
The latest Urban Land Institute/EY Real Estate Consensus Forecast is slightly more optimistic than the previous survey in April regarding commercial property transaction volume and pricing, multifamily fundamentals and returns on institutional CRE properties.
The 43 experts representing 32 of the U.S.'s leading real estate investment, advisory, and research firms surveyed for the forecast last month included CoStar Portfolio Strategy economists Hans Nordby, Walter Page and Shaw Lupton.
"We're at a point in the cycle where things feel very good," said Josh Scoville, senior vice president for research with Hines, during a panel discussion on the forecast's release. "There's plenty of price and rent growth, but we've got to be aware of the risks, because it will change."
The panel, which included David J. Lynn, CEO and co-founder of Everest High Income Property and Martha Peyton, managing director and head of global real estate strategy for TIAA-CREF, raised concern over more recent economic news, including this week's equities market selloff, the drop in oil prices and anxiety over global economic growth.
"We've just got to be aware and not get too complacent, because things that are good tend to change for the worse," Hines' Scoville noted.
Overall, the forecasts for commercial real estate sectors remain positive, despite slightly lower sentiment from last spring on a few key indicators such as CMBS issuance, housing starts and housing price growth. And the U.S. remains a strong haven for cross-border investment, analysts agreed.
"Global investors generally have an optimistic view of real estate market opportunities worldwide," said Howard Roth, global real estate leader at EY, noting that a broad consensus of the experts predict a continued rise in global transaction volume.
The future for CRE and the economy looks bright despite the current market turmoil in the U.S. and volatile conditions around the world of late, especially in Europe.
"While some see an economic slowdown as a concern, currently, conditions remain positive for real estate investing over the next several years," Roth said.
Key findings from the Urban Land Institute/EY Real Estate Consensus Forecast include the following:
  • Commercial property transaction volume will grow, although at a declining rate, and exceed 2006 volume, which was the second highest pre-recession annual volume, by 2016 to $445 billion.
  • CMBS issuance, which increased nearly 80% in 2013, is expected to continue a more moderate annual growth pace, increasing another 43% by 2016.
  • Institutional real estate assets are expected to provide total returns of 11% in 2014, moderating to 8.5% annually by 2016.
  • Commercial property prices are expected to increase by 10% in 2014. Price increases will then moderate to 6% in 2015 and 5% in 2016.
  • Vacancy rates are expected to fall modestly for office, retail and industrial properties and rise slightly for apartments. Hotel occupancy rates are expected to continue improving.
  • Rents are expected to increase for the four major property types in 2014, ranging from a growth rate of 2% for retail up to 4% for industrial. Rent increases for all property types are projected to rise by 3% in 2016, with the exception of office space, which is predicted to increase by 4%.
  • Single-family housing starts are projected to increase to 912,500 units per year by 2016, remaining below the long-term annual average.

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Recent SoCal Industrial Real Estate Deals

AIR Member Deals
Ventura County
      •
DAUM Reports Eight-building Industrial Sale in Camarillo
DAUM Commercial Real Estate Services represented Marcus Adams Properties in its acquisition of six multi-tenant and two single-tenant industrial buildings totaling 205,669 square feet, all located in the Flynn Road Industrial Park in Camarillo.   Sale price was $23.4 million.  Mitch Conlee of DAUM represented Marcus Adams and Sam Wagner of TOLD Partners represented the seller.  At the time of sale, the properties were 96 percent leased with a total of 28 tenants.

       •
CBRE Brokers Ink Long-Term Lease for PODS
CBRE reports a 65,000 square foot long-term industrial lease for PODS, Inc., for property located at 301 S. Rose Ave. in Oxnard.  Lease value is nearly $2 million.  PODS leased space in the 232,500 square foot building owned by One Miracle Property.  Paul Farry, Jim Meaney, and Doug Shaw with CBRE represented both the landlord and tenant in the transaction.

Southeast Region
       •
Colliers Arranges $21.8 Million Sale to Mover of ‘Historic” Items
Colliers International has arranged for the $21.85 million purchase of a replacement facility in La Mirada for Dunkel Brothers Machinery Moving Inc.  Clyde Stauff, Senior Executive Vice President, and Chuck Wilson, Senior Vice President of Colliers, acted as advisors to Dunkel Brothers.  Dunkel Brothers specializes in the rigging, transport and relocation of heavy machinery and mechanical apparatus.  The firm is best-known for its headline-making move of the Space Shuttle Endeavor from Los Angeles International Airport to its new home at the California Science Center in Exposition Park.  The 237,089 square foot building on 12 acres is located at 14555 Alondra Blvd. and will serve as Dunkel’s corporate headquarters following extensive renovation. Luke McDaniel and Cameron Driscoll of JLL represented Heitman, the previous owner.

       •JLL Closes 254,718 Sq. Ft. 3rd Party Logistics Lease
JLL announces the completion of a lease with a third-party logistics firm, All-Ways Pacific, LLC, for a 254,718 square foot industrial building located at 15300 Desman Rd. in La Mirada.  JLL Orange County Senior Vice Presidents Luke McDaniel and Cameron Driscoll represented the landlord.  DAUM Commercial Real Estate Services represented the tenant.  The Class A warehouse/distribution facility features 39 dock high and three ground level loading positions with cross dock loading, 41 foot warehouse clearance, and ESFR sprinklers.

South Bay
       •
Heger Aids Buyer in $8.4 Million Compton Purchase
Heger Indusrial’s Bill Joseph announces his representation of SLAB Properties, LLC, the buyer, in its acquisition of a 72,000 sq. ft. industrial facility on approximately 3.5 acres of land at 250 W. Artesia Blvd. in Compton.  Consideration was $8.4 million.   SLAB Properties, through its operating arm, Insulated Products Corporation, manufactures thermal packaging for food, industrial and pharmaceutical companies.  David Mensinger of The Everest Group, Inc. represented the seller, 250 West Artesia, L.P.

Orange County
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Tomaselli, Niles and Wagner Team for Long-Term Longust Lease
JLL Orange County’s Senior Managing Director Louis Tomaselli, and Senior Vice Presidents Zach Niles  and Steve Wagner represented Longust Distribution in a 20-year, 93,818 square foot industrial lease at Anaheim Concourse, a 1.4 million square foot master planned industrial project currently being developed by partnership of Panattoni Development Company and Clarion Partners.  Panattoni Development and Clarion Partners

Just Leased:  5,862/SF Commercial/Industrial Building on 9th Street in Upland, CA.  Contact Noah Samarin for more information.

Next Industrial Hot Spot?

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Rialto wants to be the Inland Empire’s next go-to industrial zone. CapRock broke ground on two fully entitled distribution centers totaling more than 1M SF, located one mile apart near the 210, 15, and 10 freeways; an existing building is being demolished to make way for the 609k SF CapRock Distribution Center I. The same day, CapRock broke ground on the 428k SF I-210 Industrial Center. (Lowe’s may be out of shovels.) The two projects will create 250-plus permanent jobs and expand Rialto’s tax basis by $60M. Pictured: CapRock Partners acquisitions director Jon Pharris, CEO Jerry Pharris and COO Pat Daniels (far right) and Rialto Mayor Deborah Robertson and Mayor Pro-Tem Edward Palmer.

The CapRock folks have invested in the Rialto area for more than 30 years, but the company isn’t done there. The value and industrial investment firm snapped up 65-plus acres of dairy land in Ontario, with plans to entitle 1.3M SF of big-box industrial buildings. Ontario is still the epicenter for industrial in SoCal, says Jon (snapped last month at Bisnow's Industrial Real Estate Summit), and the site is one of the IE’s last infill locations. Located at the northeast corner of Remington and Carpenter, the property borders the City of Chino, just east of the Chino Airport. It’s also in a good neighborhood, adjacent to where Watson Land plans to build several million feet of industrial space.

Jerry expects the
development to benefit from large corporations’ growing desire to reduce costs
by consolidating
multiple facilities
into big-box locations. Daum’s Eric Fikse and Rick John repped the
seller.

DTZ/Cassidy Turley Merger Adding Another Global CRE Player
Can DTZ Group Take Third Place In the International Properties Services Market?
September 24, 2014
The merger of Washington, D.C.-based Cassidy Turley with DTZ announced this week pairs a mid-market company with 60 offices around the U.S. with a recapitalized international player that has long sought a bigger piece of the U.S. property market -- and now has the financial backers to bankroll its global expansion.
The new DTZ Group, created by the acquisition of Cassidy Turley by a consortium of private equity company TPG Capital, PAG Asia Capital and Ontario Teachers’ Pension Plan, would approach Cushman & Wakefield in terms of annual revenue.
The Cassidy Turley acquisition should enable DTZ to make an instant impact in the all-important U.S. market. While DTZ has a strong franchise in Europe and Asia, "They’ve been mostly an afterthought in the U.S.," said Brandon Dobell, an analyst with William Blair & Co. who tracks the CRE services industry. The challenge for the new company during the integration will be keeping top CT talent, especially tenant representation experts, from jumping ship, he added.
It's likely that DTZ will pursue an IPO down the road as part of its bid to become a true rival to CBRE, JLL, Colliers International (a unit of Toronto-based FirstService Corp.) and HFF Inc. Such a move is expected, Dobell said, given the solid performance of the CRE services sector and the new company’s need to raise cash to recruit talent and lock up key producers.

Revenue/Employee Count for Major CRE Firms Company 2013 Revenue Employees
CBRE $7.18 billion 44,000* JLL $4.46 billion 52,700 DTZ Group $2.9 billion (est.) 28,200 Cushman & Wakefield (Exor S.p.A)$2.5 billion16,000Colliers International (FirstService Corp.)$2.1 billion15,800

*Excluding 4,325 affiliate employees

"You have a private equity backer that at some point will need some liquidity -- TPG is not in the business of holding things for a decade or two," Dobell told CoStar News. "Obviously, Brett White is a tremendous asset for TPG, as well as for the operating company. He’s seen everything, been through a ton of market cycles and M&A during his time at CBRE, so he’s an invaluable resource."
Although the value of the transaction was not disclosed, the Wall Street Journal reported the deal at between $500 million and $600 million, including less than $75 million in debt, citing sources familiar with the transaction.
The Cassidy Turley transaction hinges on the expected closing of the TPG consortium’s $1.15 billion acquisition of DTZ from Australia-based UGL Limited, whose chairman, Richard Leupen, on Tuesday called the CT deal "a positive development for both companies."
"We believe the potential combination of these two companies will reinforce DTZ’s positon as a leading global property services company and enhance the future opportunities for both companies and their people," Leupen said. UGL also confirmed today that TPG has advised of its intention to complete the purchase of DTZ in early November.
Dobell said the Cassidy Turley transaction is emblematic of the consolidation wave that has swept away numerous mid-sized CRE firms, leaving a few large companies and niche players. Most recently, London-based Savills PLC paid $260 million in cash and stock for New York-based Studley Inc.
Since the 1980s, the CRE services space has resembled the investment banking industry, evolving from a couple of large firms and scores of much smaller players to a handful of large companies and niche firms competing against a pool of middle sized firms that have either lost their business identity or can’t match the global scale and reach of their larger rivals.
"The middle is going to be challenging. Just look how many firms have gone away the last four years," Dobell said. "This transaction brings together two firms that were at risk if they couldn’t get bigger -- and it probably staves off customer and broker concerns about the longevity of those businesses."
In today’s environment, service providers like JLL and CBRE that cross-sell financial services or serve multinational companies with a global list of services like property and facilities management a grabbing a disproportionate share of sales and leasing activity, Dobell explained.
"The competitive pressures for having a full suite of services globally are really relevant, and are certainly fueled by access to cheap debt," Dobell said, noting that CBRE, now a $10 billion company, was at $200 million market cap as recently as 2008.
Recurring revenue streams such as property and facilities management are much larger, constituting 40% of total revenue for JLL and CBRE compared to 15% or 20% in 2007, creating a hedge against property market peaks and valleys.
"As the CRE industry becomes more diverse, the business is becoming less cyclical, and those kinds of companies tend to be pretty good places for private equity money, as well as places where brokers will stay put through a market cycle," Dobell said.
Just Sold:  21,098/SF Freestanding Industrial Warehouse on 1.35 Acres in South Ontario.  Noah Samarin of the Samarin Industrial Group represented the buyer, Ashtel Dental LLC, in it&#8217;s purchase of the property to be used as it&#8217;s North American Headquarters.

Just Sold:  21,098/SF Freestanding Industrial Warehouse on 1.35 Acres in South Ontario.  Noah Samarin of the Samarin Industrial Group represented the buyer, Ashtel Dental LLC, in it’s purchase of the property to be used as it’s North American Headquarters.