Los Angeles-located single-tenant industrial properties are in high-demand. The problem: they are becoming a rare find in the extremely tight and competitive market. This year, however, more product could come to market with owners encouraged by the strong market dynamics and record pricing. Daum Commercial's Casey Mungo recently sold a 57,000-square-foot single-tenant asset in the Greater L.A. market, and says that while highly desirable, there are opportunities to buy.

"Since these assets are in high demand, cap rates can sometimes be extremely compressed," Mungo, EVP at Daum, tells GlobeSt.com. "We are seeing cap rates between 3.5% and 4.5% on a regular basis. Sellers are taking this opportunity to move their equity into investments producing increased cash flow."

These deals are highly desirable because of the location. Southern California and Los Angeles in particular is one of the most coveted industrial markets in the country. "Well-appointed industrial properties in the submarkets within the immediate vicinity of the ports of Los Angeles and Long Beach are highly desirable and sometimes hard to come by, as demonstrated by vacancies consistently posting in the 2-percent-range," says Mungo.

To win these deals, buyers have to come in with competitive pricing as well as certainty of execution. "Often, these properties will have a pool of several potential buyers," says Mungo. "We advise our clients to take a 'best-foot-forward' approach and have a sound strategy in place that will position them to make a highly competitive offer from the start."

For buyers looking to win a deal, this could be the year. It is likely that owners will look at the market timing and decide to sell. "With vacancy rates reaching all-time lows, there are still excellent opportunities in the market," says Mungo. "Bullish investors will continue to build their industrial portfolios, especially as the economy appears to be holding steady with attractive interest rates."

Despite the limited opportunities, sales volumes are still strong in the Los Angeles market, with institutional investors becoming highly active. "We are still seeing relatively high institutional investor activity in the market and are anticipating a sustained strong sale volume throughout 2020," says Mungo.

Instant Insights /

How to Secure Rare Single-Tenant Industrial Assets in L.A.

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