Blog

Originally posted February 3rd, but things have changed considerably since with the global coronavirus COVID-19 pandemic and social unrest!  With the desire to socially distance and find open spaces one must wonder if people will be motivated to avoid the dense urban centers and move to the more spread-out area of the suburbs.  This would be a bit of a countertrend to previous years with the TODs (Transit Oriented Developments) and mixed-use developments in city centers.

On the other hand, the desire to avoid crowds and packed retail buildings, more folks are using ecommerce.  This will only increase the already overwhelming demand for warehouse space, especially in the areas close to the population base where faster delivery is possible.

These changes have only led to a stronger argument for this trade idea!

***

This trade seems to make more and more sense for the commercial real estate investor of late.  Multifamily appears to have peaked after an extended run and is experiencing downward pressure over concerns with governmental/legislative issues, especially regionally here regionally in Southern California.  Meanwhile, Industrial is starting to take over as the hottest commercial real estate segment.  Also, some apartment owners no longer have the tolerance to deal with the higher demands and maintenance needs multifamily typically requires or they have moved out of the area.

The solution?  Sell your Multifamily Assets and Trade into Industrial Real Estate Properties.  Why Industrial?  Ecommerce and its explosive need for space.  With all the big box retail giants like Sears and Toys R Us shutting down, ecommerce has disrupted the industry transferring the need for space from store to warehouse.

In 2017 e-commerce accounted for 9% of all retail sales in the United States and is expected to grow to 12.4% this year!  Based on those numbers e-commerce appears to still have a lot of room to run.

It’s also normally considered an easier asset to manage with less demands.

So, what’s the first step if you’re interested?  Get an idea of what your Apartment Building is worth, so you have an idea of your budget.  Next get a list of available properties to trade into.  This can include leased properties with stabilized returns, upside potential or vacant properties with proforma projections.  A good broker should be able to help you with this, feel free to reach out if you do not know where to start.

• Residential Redevelopment Opportunity

• Exceptional Corona School District

• Area With A Predominance of Affluent Households and Strong Demographics

• Property Currently Has ±20,000 SF Industrial Building With ±1,300 SF of Office and Bonus ±6,700 SF Covered Storage Space

CLICK HERE FOR BROCHURE AND MORE INFORMATION

A California Commercial Real Estate Legislative alert went out last Friday from AIR about SB 939, a COVID-19 related measure.

The proposed legislation could require lessors to defer CA rent obligations for more than a year or allow the tenant to negate the lease and walk away with no responsibilities for tenant improvements.

If passed the measure would be in effect for 22 months from March 2020 or for two months after the end of the state of emergency, whichever is later.

As mentioned in the notice the proposal mysteriously (or as they say unfairly) doesn’t apply to any publicly traded companies or one that is owned or affiliated with a publicly traded company (franchisee).

Included in the notice are better potential options like the proposal put forth by Toni Atkins.

For more information, read the full bill or to send a letter opposing SB 939 CLICK HERE.

New Listing for lease in Long Beach, CA:

• ±5,500 SF Industrial Warehouse
• Floor Drains
• Fenced and Paved Yard
• Located in Cannabis Zone
• Close Proximity to Freeways and Ports
• Former Food Facility

CLICK HERE FOR MORE INFORMATION

Ron Mgrublian of Lee & Associates completed a 5 year  lease for a 100,345 square-foot industrial warehouse space located in Rancho Cucamonga, CA.  The value of the lease is approximately $3.9 Million. Mgrublian of Lee & Associates in Long Beach represented the tenant... MORE DETAILS

In addition to PPP, the SBA will now pay your new or existing SBA mortgage for six months!  Our office recently had a buyer who got the first 6 months of their mortgage covered by the SBA and the first 3 by their bank.  Additional debt relief is also available, if you need more information a good broker should be able to point you in the right direction, CLICK HERE FOR MORE INFORMATION.

COVID-19 has impacted the Los Angeles/Long Beach Industrial markets on the heels of another record breaking year in 2019.  Q1 saw a slight increase in the vacancy rate, but also an increase in the average asking lease rate.  Congress passed the Payroll Protection Program (PPP) and other programs designed to provide relief and 1031 exchange buyers received extended deadlines.  CLICK HERE TO READ THE FULL REPORT

The vacancy rate rose in the San Gabriel Valley Industrial Market in first quarter of 2020.  New construction brought additional square footage to the marketplace adding over one million square feet.  It will be interesting to see how this new supply is absorbed as situation regarding COVID-19 continues to unfold.  Click here for more details.

Cybercriminals are taking advantage of the unusual times we’re in.  Fake emails, texts and phone calls intended to manipulate the situation in relation to COVID-19 and Commercial Real Estate are reported on a daily basis, I’ve received a few myself.  Use the Stop, Call and Verify call process to protect yourself from scammers.  Click to here for more details.

Come in November here in California, voters will have to opportunity to vote on the split roll tax.  What “split roll” refers to is traditionally all California real estate had a unified tax roll, commercial being assessed the same way residential is.  The split roll initiative proposes changing the way commercial is assessed from residential.

The first initiative for the split roll tax for the November ballot was withdrawn so the one we are likely to vote on is the 2^nd version.  It has been given the somewhat deceptive title “California Schools and Local Communities Funding Act”.  What it proposes is eliminating the limitation on annual increases and taxable value for commercial properties which currently caps at 2% upside a year.  The change would remove the cap and allow commercial property to be reassessed on a continuing basis.

The increase in cost to business and commercial property owners is estimated to be $12 billion a year.  Because most businesses lease their property, the cost would likely  be passed on to the tenant and ultimately flow down to the consumer.  This would remove predictability and stability of costs associated with property tax and would probably cause an initial shock that puts many companies at risk of going out of business.  Advocates have also openly expressed the next step would be going after residential protections.  Some examples of types of businesses that would be affected would be movie theaters, shopping malls, gas stations, supermarkets, retail stores, auto dealerships, car washes, restaurants, hotels, self-storage facilities, factories, warehouses, businesses in office buildings and strip malls.

More information can be found at https://www.hjta.org/.

Notice 2020-23 now provides some relief to taxpayers who are currently engaged in a 1031 exchange from the 45-day Identification and 180-day exchange period deadlines.  For example:

• If your identification period falls between 4/1/2020 and 7/15/2020 you have until 7/15/2020 to identify your prospective replacement properties
• If your 180-day deadline falls between 4/1/2020 and 7/15/2020 you have until 7/15/2020 to complete your exchange transaction.

Click here for more information

An additional $250B for the Paycheck Protection Program (PPP) was recommended today to help small businesses (less than 500 employees) reeling from the coronavirus pandemic.  For those who have not already seen, the PPP is designed to provide small businesses help with funds to pay up to 8 weeks of payroll costs including benefits, interest on mortgages, rent and utilities.  Click here for more details as well as the link to apply for funds.