Industrial land prices are soaring as users scramble to find quality infill locations amid supply constrictions. Specifically, new product with 30-plus foot clear heights is in highest demand, and the only way to get more is to build it. As a result, industrial developers are paying double what a retail developer will pay, and are competing with office and some multifamily deals. Barbara Emmons Perrier, vice-chairman of capital markets at CBRE and an industrial expert, says that aside from multifamily with density, industrial land prices are the highest in L.A.

“Industrial pricing has gotten to such a high level that other than multifamily with density, it is probably the highest level,” Emmons Perrier tells GlobeSt.com. “Multifamily could still have higher values, depending on the site and the density; however, industrial values have really hit all-time highs. Right now, land is in very high demand.”

Of course, ecommerce is driving the high prices. Nearly all of the new development projects in Los Angeles are warehouse or distribution centers, not manufacturing. These facilities have specific building and geographical needs. “With the ecommerce trend, people are looking for class-A very efficient buildings for distribution,” Emmons Perrier adds. “A lot of our market is older and filled with functionally obsolete buildings. As land becomes available, it is in high demand because you can build a brand new building, get the highest rents and have the highest demand.”

Even as prices increase, however, demand hasn't waned. When a site comes to market—an event that is becoming a rarity in Los Angeles—it isn't unusual to see dozens of offers. “We are getting 25 or 30 offers on land deals, and we have 15 people in the best and final,” says Emmons Perrier. “It is hard to get people to not participate. You can only sell the property to one person, and it is getting complicated to get there with so much interest. We end up doing multiple rounds of bidding.”

To cash in, some land owners a trying to obtain industrial zoning. “We had a 90-acre site in Irwindale along the freeway, and the industrial developers that bid on it could afford to pay $50 to $60 per foot. The retail developers could only pay $25 a foot. That means industrial developers can afford to pay double for an industrial site,” says Emmons Perrier. “If you are the owner of the land site, you are going to want zoning for industrial.”