Industrial Real Estate Takes Off!

In Downtown Los Angeles, on Jefferson Blvd. near San Pedro Street, is an approx. 40,000 sq.ft. industrial building. The building is a Class B+ concrete tilt-up warehouse built in 1974. The property is in very good condition and has an excellent location.

Last year, Major Properties marketed the property for $5.5 million, which is $130 per sq.ft. There had been maybe 2 showings a month during the past year, but no real offers. This was a sign of a static real estate market, as properties all over Los Angeles had sat with no buyers. Late January, I met with the ownership and discussed a price reduction. The ownership agreed as they wanted to sell. They lowered the price to $5 million, or $117 per sq.ft. During the past 45 days we had approximately 20 showings, and now we are going into escrow within 3% of the asking price.

For students of brokerage and trends in the industrial market, what is the meaning of this transaction? First, there are at least 20 businesses that are looking for properties that are 40,000 sq.ft. Second, they are looking to buy a property in the $5 million price range. Third, access to money and the ease of completing this type of transaction has become available almost overnight.

The current availability of quality space in and around the Downtown market is low. I have heard vacancy factor numbers as low as 3%. The fact is, if we did a search for a similar space for sale within Downtown, we would find nothing. This tells me to contact owners with similar sized buildings, as there are 19 other potential buyers that need to purchase a building.

This is also a sign that prices will eventually go up as demand continues and supply shrinks. Right now, I see that prices have hit a plateau; either the market is in pause on the down cycle, or recovering and heading up. The real estate owner/user market is signaling a stabilization period and pointing to a steady upward trend. For everyone's future, let's hope the historical tea leaves are predicting the latter.

In other news, the other event that is on the mind of many Angelenos is the Laker's current run to defend their championship and three-peat. I will say that barring any major injury, Phil Jackson is going out with one more ring. That being said, maybe Donald Sterling can hire Phil out of retirement and help the Clippers make a run for a title. Blake Griffin is an amazing player and with the right coach and role players the Clippers could be great.

It is important to acknowledge that when our city is united through sports, there is an energy that carries over into business. I think that most business people I meet enjoy discussing topics related to sports. When the home teams are winning, they are more likely to feel good about their city and do more productive business. See what your associates, clients, partners and friends think about this. I am curious and I invite you to email me your thoughts.

The other factor is that there have been many deals around student housing, acquisition of existing properties and speculation in development of new product. These deals are related to Westwood (UCLA) and Downtown adjacent (USC). Additionally, there are deals going down now on land acquisition for new hotel developments and apartments in downtown.

There are a few large sites still available that are not really on the market. They are a minimum of 5 acres and up to 25 acres. These are sites that can support large warehouses for distribution or manufacturing. The next 3-5 years are important for the City of Los Angeles and our business to find the most modern and labor intensive uses for these sites to attract job opportunities. The higher paying the jobs the better, but the creation of quality long term employment opportunities is crucial for the continued growth and viability of Los Angeles.

Properties in the San Fernando Valley, South Central Los Angeles, East Los Angeles and other areas need to be developed as well to successfully spread the wealth and enhance growth. As much as I love Downtown, I see the need to protect the needs of everyone and not lose focus on the entire city.

The months ahead are going to be interesting in Los Angeles as we have mayoral election coming up and the hopeful continuation of this recovery. I remain bullish on Los Angeles and will keep you informed as the year progresses.

Doom and Gloomer

DOOM AND GLOOMER, maybe you should not read this!

I look forward to Sunday with the TV news shows. The one show that I really liked, which is no longer on TV, was the McLaughlin Group. There were 4 political pundants and John McLaughlin debating the issues of the day. What I liked most about the show were the commercials. GE (General Electric) would show a professor expounding "This is the greatest time to be alive!" and I love their little jingle: "GE, we bring good things to life."

They hit the nail on the head! Life, life and more life. What is happening around the world today with uprisings, marching in the streets, people demanding freedom, quality food and water? Basic necessities to have liberty and enjoy life. Believing in what their government is telling and offering them is no longer acceptable to those in dictator led countries.

Those of us whom have comfortable consistency already in our lives want more and better everything. We want a better living environment or job that pays a little more. We want to enjoy our jobs and have less stress. We want the better car, computer, cell phone, iPad, etc.

There is a big difference between what we want and what we need. Much will be written about the Japanese earthquake and the tsunami's effects. Watching the Japanese and their response and reactions to their tragedy is heartwarming. Actually caring for one another in a time of crisis is so foreign to us. If that type of calamity hit Los Angeles, there would be looting, rioting and outright panic with no regards for others, their property or right to life. This city would turn into total chaos! I hope I’m wrong, but what do you think? What would happen here if Malibu and Marina Del Ray were gone overnight by a tsunami?

James Clavell wrote two books I would recommend, King Rat and Shogun. Both give amazing insight as to the unique treasure of the Japanese culture and unique prospective into their world. Both are stories about survival, greed and loneliness. They touch on the basic components of our own emotional character. They also share triumph, success and survival.

I recently saw the documentary I Am by Tom Shadyac (the director of the Nutty Professor, Ace Ventura, Bruce Almighty, etc.) Tom had a terrible accident while out on a dirt bike. He fell, broke his arm and hit his head. He was in a coma and awoke to a new world of trauma where he could not return to normal life for quite some time. During this tragedy, he found that he needed to discover the meaning of his life. He asked the question “What is wrong with the world? Am I helping or hurting the world with what I do?" The movie is his journey to find the answers for himself and to share his discoveries. His web site is http://www.iamthedoc.com/. Highly recommended.

I work with all kinds of people. My clients are some of the wealthiest people in Los Angeles. Some are very charitable and others are far from it. Some give millions anonymously and others are in the newspaper glorifying their name. What I find is that you do not have to be rich to make a difference. A kind word, a note of recognition or an email of sympathy to someone who is going through a loss and hard times is more valuable than money. A sandwich to the homeless guy, or a pair of old jeans can be more valuable to someone in need. Helping someone get a job that you don't really know or putting your reputation on the line for someone else to help them move forward with their aspirations. Using your assets to help others.

I try to do this daily. I just do it out of habit now. I don't really think about the effort, it just flows. I see a need and try to help. I can tell you that without question, this effort has given me returns that are not accountable on any balance sheet. The pleasure and reward from the act come first and later from the changes that were made to benefit the lives of others. Some recipients may take advantage of the opportunity and not take the time to say thank you. While others may not understand the gesture at all as it is foreign to their character. I learned to give without the concept of expecting anything in return. It is amazing what happens from that.

I have been the recipient of amazing success and opportunities because of my attitude about business and life. By sharing, I think my business has done much much more in dollar volume than if I was a different person.

I just opened escrow on a 10,000 sq.ft. industrial property. I represent the seller and the buyer has his own broker. After a long negotiation, the contract went out to the buyer and it was signed and came back right away. Prior to having the seller sign it, I noticed that we made a typo. The price was $1,212,500 but the contract read $1,122,500. I made the change and we resent the contract to the buyer, who of course signed it. Now my question is, did the buyer see the mistake and try to let it get by the seller? Was it his responsibility to recognize the mistake and correct it? Is it all fair in business? What do you think and if you’re the buyer what would you do?

This is an amazing time to be alive. We can sit by the TV and listen to experts tell us how bad we have it, or we can go outside and sing about how wonderful life really is. We can make a difference and still make a deal. We can have both, and we can share and help others enjoy the fruits of our labor.