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.
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