Featuring: Juan Gutierrez, Senior Vice President
Juan is a market leader who brokered 34 sale transactions totaling 1,851,974 SF valued at $252,061,215 in the last 3 years. Juan and I have 3 upcoming ground-up development projects in Rialto and Riverside that break ground next year.
How has development in the Inland Empire changed over the last few years?
E-commerce demand has changed developers’ strategies. Building size and features have been modified to accommodate sophisticated logistics tenants. For example: Large truck courts, trailer parking and exceptional warehouse clear height are in high demand. Additionally, large, high-image, modern distribution buildings are the new norm, while multi-tenant projects are far and few between.
What are the most important features of a land site?
Zoning, entitlement process (changes city by city) and offsite costs. Too many brokers compare apples to oranges and can misguide their clients on value by overlooking these factors. Overhead lines, street poles, utility hookups and other off-site costs are also important features that impact value. Shape is important to maximize Floor Area Ratio (FAR). Freeway access is less important now that tenants are willing to drive further for functional buildings.
Are Joint Ventures (JV’s) common?
Joint Ventures are uncommon. Developers typically require control over the project especially if an equity partner is involved. Once landowners discover this, staying in the deal is less attractive.
What about Build to Suit projects?
Most development is done on a speculative basis and build to suit requirements usually occur for specialized requirements. Amazon has been involved in a few build to suits recently primarily due to the fact that they modified plans to include an over-sized truck court, higher ceiling height and additional parking stalls. We occasionally see build to suits for temperature-controlled buildings as well.
Is there a hole in the market?
Buildings 30,000 – 80,000 SF are under-supplied. Developers prefer larger sites because they pencil better, financially. The pool of developers pursuing less than 10-acre sites is small. Recently, a few specialized organizations have started to pursue smaller sites, but for now, a hole in the market still exists. Buildings this size are in high demand.
Will COVID-19 diminish developer appetite?
Current market sentiment is to wait and see. This posture is likely to maintain until there’s better direction. We are seeing price reduction requests and more commonly, buyers are asking for extensions until they can revise their proformas accurately. The Inland Empire has always been an overflow market for Orange County and Los Angeles and we predict demand from developers and logistics tenants will continue.
By: John Viscounty & Juan Gutierrez