Voit Real Estate Services 3Q 2021 Market Report
Real Talk with Real Experts: Inland Empire Industrial Owner User Edition
Real Talk with Real Experts: Inland Empire Industrial Owner User Edition
Featuring: Sean Sullivan, Vice President
Sean is a specialist in owner user requirements who recently brought to market a 12,450 SF freestanding industrial building on Balboa Avenue, south of the Ontario Airport.
What is the current state of the market?
Activity is strong, all things considered. However, buyers are less confident because of uncertain lending. Some institutional banks have paused indefinitely to assist with government assistance programs. Capital is still available for those willing to work with other groups. Those searching pre-COVID are still in the market, especially for challenging requirements.
Can you explain the array of pricing?
New product continues to reach record figures. Consumers demand functional buildings and are willing to pay up. One issue is the increasing gap between class A and class B product. It’s common for class A product to drag other classes upwards, but the gap is widening. A 20-year-old or older building will not sell for new product pricing. Better clear height, loading and general efficiency play a vital role in value. Buyers understand this but many sellers do not. Additionally, higher clear height can reduce the footprint and overall cost of the acquisition. This provides justification for record high offers.
Will small buildings be built again?
Developers prefer larger sites because they can build larger buildings. Only a handful of specialized developers are interested in sites less than 7 acres. However, prices for small buildings are increasing rapidly, and we predict more small development is on the horizon. As the IE west becomes an infill market, developers will be forced to look at small building projects.
Is a market downturn inevitable?
Pricing has not taken a hit in the IE, but if the virus gets worse, things may change. Variables to be mindful of include a second wave or a political change. Government assistance programs will inevitably halt, and a picture of the actual damage will be clearer. For now, low vacancy and solid demand will keep the market moving.
Is this a risky environment to purchase a building?
For the right fit, it’s always a good time to buy. Buyers who plan to own and operate for the long run should have faith in macro market fundamentals. For example, clients who considered purchasing 5 years ago are kicking themselves today. We recommend buyers stay patient and thorough but unafraid of seizing the right opportunity. The market is competitive and those who hesitate often find themselves on the sidelines.
By: John Viscounty & Sean Sullivan
