Looking to lease or purchase industrial real estate in Los Angeles? If so, welcome to the extensive waiting list of other businesses all seeking similar solutions for their space needs.
The L.A. vacancy rate is roughly 4% below the national average, sitting at 1% or lower in most submarkets. The limited inventory of available industrial space that does actually see the market is also evaporating rapidly.
With rising prices and no substantial change to market fundamentals on the horizon, decision makers will be faced with serious challenges in the coming months. Here are four (4) recommendations to consider given the complexities of today’s marketplace:
#1 Lean on Existing Relationships
Today, who you know can have more of a positive impact than what you know. Being acquainted with the right players in the commercial real estate industry can help raise awareness to off market opportunities and advanced lead time to act.
If you don’t have the right contacts in place, make sure your real estate broker does – and don’t be afraid to ask them the hard questions, verifying their experience, references, and recent transaction history.
Industry insider and expert, Frank Schulz, SIOR with the Klabin Company added, “Many properties are garnering multiple offers and never hitting the open market. Strong relationships with landlords and brokers alike are key to gaining valuable insights for clients. In a fast moving, competitive market, he who has the best relationships wins.”
#2 Examine Efficiencies
Creative solutions are often available when identifying efficiencies becomes a focused pursuit. Consider engaging a racking consultant, space planner and/or architect that can analyze your business and its current operations in depth.
According to LA industrial veteran, Jon Reno, SIOR with Kidder Mathews, “Time and time again, we find that an outside set of professional eyes can deliver a unique perspective for our clients. Be open minded to changing processes, systems and innovation.” It may be that your business can actually do more with less and not have to relocate – at least for the foreseeable future until more viable choices become available.
#3 Consider Alternative Locations
The push for housing and mixed-use craze in recent years has resulted in millions of rezoned square footage that is no longer considered industrial. However, there are still alternative markets available – each offering a variety of product and pricing.
If you maintain flexibility and can expand your search beyond the core L.A. market, explore all reasonable options. It is not uncommon for brokers to run a comparative analysis across multiple regions – ranging from downtown L.A., Inland Empire to Phoenix – and targeted cities within each. Having options will reduce the pressure to make a rushed decision and in the process, costly mistakes.
#4 Start Early
Start early – extremely early. With L.A. breaking records, settling for a short-term stay is not necessarily the smartest move.
According to San Fernando Valley industrial expert, John DeGrinis with Newmark, “Supply and demand imbalances are the most significant we’ve ever seen for industrial space of any size in SFV/North Los Angeles. In the 100k square foot and up category, there is virtually zero availability for a user to chase, and no supply coming soon. It’s become an acute problem for growing users at this point, given there’s literally no available space to occupy.”
Don’t assume that your landlord will be patiently waiting for you or that others aren’t aware that your lease is coming to term. If you are eying a purchase, expect even fewer options and a big price tag.
Bottom line, the right plan that is built out ahead of time, complimented with a highly skilled real estate broker will be critical to achieving your goals. Not sure where to start? Look at sior.com for some of the industry’s leading professionals.