LOS ANGELES—Despite some shifts in sentiment, the market is continuing to perform well with vacancy rates across the board down, especially in Los Angeles, which is starting to see more retail vacancy this year. Here's a look at this week's trends, announcements and deals that you may have missed in Southern California, Utah, Arizona and Nevada.

BY THE NUMBERS
LOS ANGELES—Builders are expanding the retail pipeline in 2017, driven by a broad array of projects in the Greater Downtown Los Angeles and San Fernando Valley markets. Deliveries are set to more than double 2016 totals, and the net absorption rate is accelerating. A large portion of the space under construction is already pre-leased or a build-to-suit project, such as the space for Ikea in Burbank that exceeds 500,000 square feet. As a result, a lack of deliveries in areas with rising retailer needs, including the Westside Cities and South Bay, will continue to bolster tenant demand for existing space. Meanwhile, less than 60,000 square feet of speculative space is underway in the entire metro, indicating that developers remain conservative in their outlook. As vacancy tightens this year, the average asking rent will climb by a low-single-digit percentage, an increase from the previous year. Low interest rates also play a role. Moderate interest rates are enhancing the appeal of retail properties, with a wide variety of assets at multiple price points and locations around the metro. Institutions remain consistent bidders for infill buildings near corporate offices and apartments, particularly in the South Bay, Westside Cities and Downtown Los Angeles. Meanwhile, private investors are seeking creative deal structures and venturing to more suburban locales to deploy capital at higher cap rates. As a result, additional cap rate compression could still manifest, despite a divergence of buyer and seller expectations. Recent interest rate moves and anticipated policy changes by the new political administration remain important factors influencing valuations. First-year returns remain in the mid- to high-4% range, while outlying submarkets can reach into the mid- to high-5% band.

(SOURCE: Marcus & Millichap)

INLAND EMPIRE, CA—A steady pace of hiring, coupled with lower housing costs than other Southern California metros, has led to increased household formation in Riverside-San Bernardino and higher driving up retail sales. As a result, vacancy has been on a downward trajectory since 2011 as retailers absorb available space. In late 2016, the grocery store Sprouts penned a 35,000-square-foot lease north of the Ontario International Airport. Directly south, DD's Discounts leased up 25,600 square feet. While retailers scour the market for quality space, builders are bumping up construction, which is aligning the number of completions closer to the previous five-year average. The largest project on track for delivery is the 240,000-square-foot addition to Rialto Marketplace, which is anchored by Wal-Mart. Pre-leasing and strong tenant demand will tighten vacancy to a cycle low, despite an increase in construction this year. Additionally, improvements in the vacancy rate will aid a rise in average asking rents.

(SOURCE: MARCUS & MILLICHAP)

NEW & NOTABLE

LOS ANGELES—Inception Property Group has hired C. Douglas “Doug” Wolfley, to its team as SVP of acquisitions. Doug Wolfley has been engaged to lead Inception's property acquisitions in Southern California, which buys existing buildings or development sites for healthcare, senior living, hotels and multifamily. Wolfley's skills include site identification, site analysis, negotiations, due diligence and planning. Prior to joining Inception Property Group, Wolfley held key positions in the real estate departments of Kaiser Permamente, American Express, and The Prudential. Wolfley has also held brokerage positions at Cushman & Wakefield, Lee & Associates, and at NAI Capital. Wolfley holds a designation, and obtained his undergraduate and graduate degrees from the University of Southern California.

DEALTRACKER

LOS ANGELES— The Luzzatto Company has secured $12.6 million refinancing for 3202-3212 Wilshire Boulevard, a 28,021-square-foot, 100% occupied retail building with subterranean parking in Santa Monica, California. HFF placed the non-recourse, fixed-rate loan with a correspondent life insurance company. Loan proceeds were used to supplement the borrower's planned long-term hold of the asset in their core portfolio. Constructed in 1996, 3202-3212 Wilshire Boulevard is fully occupied by CVS Pharmacy and BevMo. The one-story retail building has a partial subterranean garage and a total of 77 parking stalls. Situated on .67 acres in Santa Monica, the property is in one of the most affluent areas in greater Los Angeles County; 23,043 households earning an average annual household income of $108,317 live within a one-mile radius of the property. The retail building is located in the Santa Monica submarket on Wilshire Boulevard between Franklin Street and Centinela Avenue. The HFF debt placement team representing the borrower was led by director Jeff Sause, senior managing director Paul Brindley and associate Ryan Ash.

LOS ANGELES—Wolverine Worldwide has signed a 720,000 square-foot lease at the Crossroads Logistics Center in Beaumont, a city situated in California's Inland Empire. The site will serve as a national distribution center for Wolverine and will support the company's fast-growing e-commerce business. The Michigan-based company chose Beaumont for their new facility over locations in Utah, Nevada, Arizona and Northern California. The master-planned project, owned by an affiliate of USAA Real Estate Company and developed in partnership with McDonald Property Group, is currently under construction and scheduled for completion in June 2017. The initial development will include the installation of automated material handling equipment.

LA HABRA—Monterra Springs Apartment Homes, a 111-unit multifamily community in La Habra, California, has traded hands for $30.1 million. Garcia, along with IPA senior director Christopher Zorbas, David Sperling, IPA senior director, and Michael Cavner, IPA associate, represented the unnamed seller, and procured the buyer, who acquired the asset via a 1031 exchange. Built in 1969 on five acres, Monterra Springs Apartment Homes is located at 861 South Glencliff St. in La Habra, which is in the northwestern corner of Orange County near Los Angeles County. The community is close to both counties' largest employment centers, and within walking distance of more than 1.3 million square feet of retail space on Imperial Highway.

RANCHO MIRAGE—Continental Partners has secured $54 million in fixed-rate, non-recourse, interest-only refinancing for the Ritz-Carlton Rancho Mirage, a 244-room luxury resort in Rancho Mirage, California. Continental Partners President Mitch Paskover arranged the financing. The borrower, a private real estate investor and developer, requested an interest only, fixed-rate, non-recourse loan to replace the maturing construction loan to buy out their existing partner in the deal. The Ritz-Carlton resort represents one component of an expansive mixed-use project that was to be developed in two separate phases. The first phase included the renovation and conversion of an existing hotel into a luxury resort and the addition of 16 for-sale residences.

PHOENIX—Emerald Industries, LLC has purchased the 9.39-acre school campus at 1305 S. Gilbert Rd. in Phoenix for $9.5 million. The site is home to Lauren's Institute for Education (L.I.F.E.), which has leased the property since 2015. Phoenix-based Emerald Industries, LLC purchased the campus from Fenway Properties of San Diego, CA. Noel negotiated the sale transaction.

PHOENIX—NAI Horizon SVP Isy Sonabend and Rick Foss negotiated a long-term industrial lease on behalf of Danby Appliances for a national refrigeration and specialty appliance company at 10397 W. Van Buren St., in Tolleson. The deal was worth $2.58 million. Danby manufactures a range of household appliances under the brand names Danby, Silhouette, MicroFridge, and BergHOFF. Danby is leasing 155,000 square feet of the 278,000-SF facility. Amenities of the property include 30-foot clear height, 40 dock-high doors, 14 mechanical pit levelers, T-5 lighting, a 50-foot concrete apron, and a 140-foot truck court. It offers immediate access to the I-10 and Loop 101 freeways.

BUILDING BLOCKS

PHOENIX—Virtua Partners announced today that Marriott International has approved its plans to develop a Fairfield Inn & Suites on its property located on the I-10 freeway in Tolleson, Arizona. The site is on the southeast corner of 91st Avenue and McDowell Road. Quyp Hospitality LLC, an affiliate of Virtua, will develop the hotel. Plans call for 120 rooms on the property. The 20-acre mixed-use project also includes retail and multi-family uses. Sales activity on the remaining parcels has been strong. The project developer, Quyp Development, expects to announce additional sales/tenants in the very near future.

MORENO VALLEY—Newcastle Partners has recently completed construction of Knox Logistics Center, a 147,000-square-foot industrial building in Moreno Valley. Valued at approximately $14 million, the property is located at 17610 Harvill Avenue. The Class-A facility is situated on 8.21 acres and features 104 parking stalls, 26 loading docks, 32” clear height, and a 122' truck court. Its corporate neighbors include Kraft Foods, Amazon, Lowes, Home Depot and a host of other Fortune 500 companies, and offers direct access to the freeway via the Harley Knox Blvd. on/off-ramp. The property has identity and clear visibility from the 215 Freeway. William Heim of Lee & Associates is handling marketing of the building, which is for sale or lease.

(SOURCE: Marcus & Millichap)

(SOURCE: MARCUS & MILLICHAP)

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