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The Real Deal Los Angeles

Industrial properties soar to new highs amid tight inventory: report

Properties are trading for $158/square foot in the first quarter
By Natalie Hoberman | May 10, 2018 02:30PM

Industrial site (Credit: PxHere)

The feverish industrial investment market reached new highs in the first quarter, as tight supply continued to drive rates up.

Sale prices rose to an average of $157 per square foot, up 17.3 percent year-over-year for buildings larger than 10,000 square feet in Los Angeles. Some properties are trading above $300 per square foot, according to a new report from commercial brokerage JLL.

That’s quite a jump from what industrial buyers were paying back in 2013. In just five years, the actual sales price average jumped nearly 70 percent, up from $93 per square foot.

The lack of supply, plus an uptick in demand from food and beverage companies, logistics, manufacturing, and e-commerce companies, have been the main drivers for the soaring prices, brokers said.

Often, the buyers that are paying top-dollar for industrial properties are institutional investors, pension funds, REITS or even private investors, said Joe Dimola, an industrial broker at JLL, said. “We’re seeing land trading at all-time highs,” he said.

Earlier this year, Newport Beach-based Bixby Land Company announced plans to acquire up to $400 million in industrial properties in California and four other states. That came shortly after acquiring a 121,300-square-foot property in Anaheim, as well as a 160,000-square-foot building in Cypress.

Earlier this week, a SpaceX-leased industrial campus hit the market. With 1.4 million square feet, sources said the property could trade for at least $180 million.

Meanwhile, companies in the sector are consolidating. The Blackstone Group reached a deal to buy New York-based industrial landlord Gramercy Property Trust for $7.6 billion this week. That came on the heels of another recent acquisition, where Prologis, a major industrial landlord in L.A., spent $8.4 billion for DCT Industrial Trust.