The first quarter of 2018 built on the momentum of 4Q17. Early first quarter reports show continued healthy performance. In Los Angeles, multifamily absorption continues to be strong, and the leasing activity continues to fuel construction activity. In Riverside, industrial absorption was also strong, despite a severe lack of inventory. There were 10.6 million square feet of gross activity in the quarter, with the majority coming from investment sales and lease activity. In addition to strong performances in the Southwest market, there was also ample deal volume and new development news this week, with a strong flow of deals in Southern California. 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—After absorbing 10,500 units, Los Angeles has preserved tight vacancy and pent-up demand throughout most of the market. Recent leasing has spurred a rise in construction activity, with a cycle-high number of new rentals slated for finalization this year. While this influx of apartments could be cause for concern, increasing single-family home values, a strong rate of household formations and diverse job growth suggest the county should experience a second consecutive year of robust absorption. However, demand for luxury rentals is being tested. In 2018, more than 17,000 units will be completed in the county, a record level of multifamily development and the highest annual volume among. West Coast metros. More than 40% of this year's new supply is in Greater Downtown Los Angeles, including nearly 4,000 rentals within the city's core. The county's three other primary regions are also slated to witness upticks in apartment deliveries, led by the Tri-Cities/San Fernando Valley and Westside Cities where finalizations total 1,900 and 1,700 units, respectively. Renter demand should match construction activity in most locales, with the exception of downtown Los Angeles, supporting a minimal rise in overall vacancy and a second consecutive year of above average rent growth.

(SOURCE: MARCUS & MILLICHAP)

RIVERSIDE, CA—Even with a lack of inventory, the East Valley Market in Southern California's Inland Empire posted strong activity and gross absorption in the first quarter 2018. Gross absorption for 2017 totaled 16.9 million square feet, continuing on the heels of the great absorption performances in 2016 of 19.3 million square feet and 2015 of 15.3 million square feet. Gross activity in the first quarter was 10.6 million square feet, with investment purchases and lease renewals accounting for 44.7% of the total. Big box development projects continue to move forward mainly being driven by companies with an e-commerce component. However, there continues to be a lack of supply in the 50,000 to 399,999-square-foot range with very few developments scheduled to address this need. Vacancy rates increased slightly in the first quarter to 6.0%. The remainder of 2018 is projected to show an overall stable vacancy rate, although it may rise given a projected increase in new supply. Bulk distribution space continues to be in high demand with many companies still moving east of the LA/Long Beach ports to capitalize on lower asking rates and sales prices. Vacancy rates in the Big Box segment and small buildings under 50,000 square feet will most likely rise in the short term as new developments are delivered throughout 2018. The base for the first quarter under construction represented 16.5 million square feet, with 91.5% of the total in the 200,000+ square feet range, a 6.5% increase over the previous quarter. There were seven buildings that completed construction in the East Valley in the first quarter, with 32 new buildings projected to be completed in the second quarter of 2018. Development of new industrial buildings will continue on projects already in the pipeline over the next year, however, that is expected to slow down after new development is completed. Average asking and actual sales prices per SF increased in the first quarter with the supply of buildings offered for sale remaining limited. The lack of supply and a slow rise in interest rates have caused buyers to make decisions quickly. Good industrial buildings for sale in all size ranges don't stay on the market long and often receive multiple offers. As a result, companies looking to buy now, and avoid paying higher interest rates, are jumping in and making offers on buildings that might not exactly fit their needs.

(SOURCE: LEE & ASSOCIATES)

NEW & NOTABLE

WALNUT, CA—Island Pacific Supermarkets is closing six stores in California. Liquidation discounts are being offered at every closing location and sales will continue until all merchandise has been sold. The six stores slated for closure are located in National City, San Jose, American Canyon, Rancho Cucamonga, Chula Vista, and Los Angeles. A joint venture of Tiger Capital Group and Great American Group will supervise the liquidation sales. The JV Group also indicated that select fixtures, furnishings and equipment in the closing stores will also be for sale. The remaining 17 Island Pacific stores will operate their businesses as usual.

LADERA RANCH, CA—Select Capital Corporation has hired Laurie Levassar and Michelle Moore as directors of national accounts. Levassar and Moore will be responsible for developing strategic partnerships with broker-dealers and building the selling group for Select Capital Corporation nationwide. Levassar brings 19 years of experience to her role at Select Capital Corporation. Prior to joining the company, she served as vice president of strategic accounts with NorthStar Securities, where she was responsible for expanding distribution and strengthening the firm's broker-dealer relationships on the West Coast and central region. Levassar earned a bachelor's degree from Texas A&M University. Moore, who has 17 years of experience, previously served as senior vice president, national accounts for SC Distributors. She was responsible for building and managing ongoing relationships with broker-dealer partners and providing sales, marketing and due diligence support for its registered investment products. Moore earned a bachelor's degree from the University of California, Davis and an M.B.A. from Pepperdine University. She serves on the education and women's initiatives network committees for the Investment Program Association.

LOS ANGELES—SharpLine Commercial Partners has named Alicia Williams as senior associate. Williams is a specialist in retail property sales and leasing and will focus on transactions in the West Hollywood and Silver Lake submarkets of Los Angeles. Williams previously held brokerage positions at CBRE and Marcus & Millichap. Her areas of expertise include product specialization, developing seamless marketing strategies and in-depth local market knowledge. Some of her notable retail transactions have included: 7-Eleven, MOD Pizza, and Jackson Hewitt.Williams commented: Prior to her career in commercial real estate, Alicia proudly served in the United States Navy. While there she consistently displayed a talent for analyzing problems and finding innovative solutions. Now, as a veteran, Alicia leverages her professional skills and expertise to optimize client success. Equally important to Alicia is her belief in giving back and making a difference. She is very involved in both fundraising and implementing programs for charities in her community including The Woman's Shelter Long Beach, The McCrary Foundation, Habitat for Humanity and Los Angeles LGBT Center.

DEALTRACKER

LOS ANGELES—JLL has been retained to provide property management services for Glendale Marketplace located in Glendale, California and Burbank Town Center located in Burbank, California. The two centers total more than 1.3 million square feet of retail space. Burbank Town Center is a 1.2 million square foot shopping center consisting of an enclosed mall and eight outparcel buildings, situated in the heart of downtown Burbank at the intersection of I-5 and Burbank Boulevard. Glendale Marketplace is a conveniently located, 153,525-square-foot, open-air retail and entertainment center in the epicenter of the Glendale retail district, across the street from the Americana at Brand.

CERRITOS, CA—New-Indy Tripaq, an industry-leading corrugated packaging company, has signed a lease in a new 44,172-square-foot industrial at 12765 166th Street in Cerritos, California. New-Indy Tripaq will utilize the space for overflow support of its other Cerritos facility located at 16069 Shoemaker Avenue. JLL's team of Cameron Driscoll and Luke McDaniel represented New-Indy Tripaq in the lease. The landlord, Megaland Enterprises, was represented by CBRE.

ORANGE COUNTY—George Smith Partners has arranged $18 million in non-recourse acquisition/bridge financing for a portfolio of multi-tenant office properties in Orange County, California on behalf of a full-service commercial real estate investment and operating company based in Orange County, CA. George Smith Partners' SVP Alina Mardesich and assistant VP Joseph P. Cannizzaro II arranged the financing. The overall portfolio is currently 85% occupied, and located in the cities of Santa Ana. The portfolio includes four newly acquired office properties along with a fifth office building already owned by the Sponsor. Loan proceeds will be used to strategically renovate and reposition the assets and maximize the value of the portfolio, driving yields for the Sponsor and its investors. George Smith Partners secured the loan at a rate of 3.75% + one-month LIBOR for a term of three years with two one-year extension options. The non-recourse loan is interest-only during the initial term and then moves to an extended 30-year amortization schedule. The loan was priced at 66% of cost and 53% of the asset's stabilized value with favorable release pricing that allows for not only maximum refinance/exit opportunities but also returns.

LOS ANGELES—La Brea Sunset Plaza, a 18,297-square foot, two-story, retail property located in Los Angeles, CA, has traded hands for $10.3 million. Marcus & Millichap's Mike Malick, first vice president, and Aria Pournazarian, associate at Marcus & Millichap's Los Angeles office, had the exclusive listing to market the property on behalf of the seller, tenants in common. The buyer, a private investor, was secured and represented by Malick and Pournazarian. La Brea Sunset Plaza is located at 1523 North La Brea Avenue in Los Angeles, CA. Built in 1978, the property measures approximately 18,297 square feet on a parcel of land measuring approximately 23,978 square feet. The property is currently 100% occupied and benefits from a highly visible façade facing La Brea Avenue.

ORANGE COUNTY, CA—Capital One has provided a $48.8 million Fannie Mae structured adjustable-rate loan to refinance a leasehold interest in Lincoln Center Mobile Home Park, a 305-unit manufactured housing community (MHC) in Cypress, California, a city in northern Orange County. Senior Vice President Chad Thomas Hagwood, who leads Capital One Multifamily Finance's Southeast region from its Birmingham office, originated the transaction, and Brandon Pate of the Birmingham office managed the transaction process on behalf of Capital One. The 10-year adjustable-rate loan has six years of interest-only payments followed by amortization on a 30-year schedule.

LAS VEGAS—Avison Young has secured the exclusive sale listing for 7350 Prairie Falcon Road in Las Vegas. The 145,910-square-foot industrial facility is fully occupied by three long-term tenants. Avison Young Principal Ben Millis and Senior Associate Dave Wrzesinski, who are both based in the firm's Las Vegas office, are representing the seller, Assaf Nevada, Inc. The building is leased to Western Linen Services, Pole Position Raceway and Gravady Extreme Air Sports, tenants that have been in the location for several years and have long-term plans to remain in the building. The building is in the Las Vegas Technology Center, a 1.5-million-square-foot, mixed-use commercial development anchored by Mountain View Hospital. The largest tenant at 7350 Prairie Falcon Road, Western Linen Services, occupies 63,910 square feet. The company operates in 12 states and is a leading North American laundry and linen services provider to the hospitality industry. Indoor go-kart racetrack Pole Position Raceway occupies 45,000 square feet and is one of the fastest-growing indoor go-karting brands in the country.

RENO, NV—Continental Partners has successfully secured a loan for the acquisition of the 102,782 square-foot Mira Loma Shopping Center in Reno, Nevada on behalf of a Los Angeles-based private investor. The financing for the transaction was arranged by J.M. Grimaldi, EVP at Continental Partners. The Mira Loma Shopping Center is anchored by CVS Pharmacy and local grocer Scolari's Grocery. The sponsor plans implement light value-add renovations to the center, as well as remediate environmental contamination issues remaining due to a former tenant.

BUILDING BLOCKS

Whittier, CA—Brookfield Residential and Lennar have broken ground on The Groves in Whittier, a large-scale, mixed-use commercial and residential development. At 75 acres, the community is one of the largest remaining opportunities for development in Los Angeles County. Located in a 126-year-old former Whittier State School and Correctional Facility into homes, retail, recreational facilities and community-serving uses. The Grand Opening is scheduled for spring 2020.

PRESCOTT, AZ—Prescott Arizona is unveiling Sterling Ranch at Talking Rock, which will include a limited number of large pristine home sites at up to 10 acres, just 30 minutes outside Prescott. In addition to sizeable acreage, Sterling Ranch is adjacent to Arizona State Trust Land and includes Talking Rock's infrastructure and amenities already in place. Plus they'll have access to a Jay Morrish Championship golf course, nine-hole Silent Moon putting course and chipping area and professional-level practice facilities. The land at Sterling Ranch is unspoiled, with quintessential Arizona high chaparral, never-ending views, and diverse topography and terrain. The land flows from dramatic granite outcroppings, to gentle rolling grassland hills dotted with juniper and pinion trees. Bordering tens of thousands of untouched trust land; Sterling Ranch offers uninterrupted vistas and generous tree cover – an extremely rare combination.

Instant Insights /

Middle Market Digest: This Week in Southwest

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