Industrial Sales Lead L.A. Investment Activity

Industrial sales are leading Los Angeles investment activity for the year. Overall, investment activity has been strong this year, but industrial activity has reached record highs this year. Bernard Huberman of BLT Enterprises expects the industrial investment activity to remain strong through 2019 as vacancy rates are at record lows and the ports are recording record levels of cargo volumes. Additionally, ecommerce sales are anticipated to reach more than $700 billion by 2022, all of which are helping to fuel industrial investment in Los Angeles.

“Rapidly growing demand for Los Angeles industrial product is a result of changing consumer behavior,” Huberman, founder and president of BLT Enterprises, tells GlobeSt.com. “It is no longer an option for warehouses to be located far away from urban centers, resulting in delivery times than can span up to two weeks. Consumers today expect packages to arrive within one to two days, and in many cases, the same day. This has resulted in an influx of demand for smaller industrial properties in dense urban core markets across the U.S., including Los Angeles.”

Investment activity in general has been focused in surrounding submarkets, like Culver City, El Segundo and Hawthorne. “We anticipate that the outlying submarkets surrounding Los Angeles such as will continue to garner strong investment activity,” says Huberman. “Hollywood has also emerged as a market that is rapidly growing as investors seek older properties to renovate into newer product.”

While investment activity is healthy, there are some challenges as we head into 2019, including construction costs. “Rising construction costs and land prices are certainly a concern as we move into the year ahead,” says Huberman. “These rising costs coupled with an increasing interest rate environment will force owners and operators to carefully evaluate deals to ensure they pencil.” A market correction is another concern, adds Huberman. “This has been one of the longest cycles in history, and despite positive fundamentals, many are approaching deals more cautiously in anticipation of a softening in growth,” he says.

While market pressures are rising, BLT Enterprises is sticking to the coastal markets in Southern California. The firm, for example, recently completed renovating a music studio in West Los Angeles into a creative office building. “We plan to remain extremely bullish in these regions, seeking opportunities for new development as well as redevelopment,” explains Huberman. “In Los Angeles, in particular, where there is a lack of available land, we are focused on acquiring ‘diamond in the rough’ properties that are located in strong growth submarkets, but are in need of renovations or repositioning. We continue to find tremendous value in this region, and anticipate that this trend will continue into next year and beyond.”