​Over the past six to nine months there has been much news related to interest rates, supply chain challenges, geopolitical conflict in many forms, food production issues, disease and hazardous material spills, to name a few things.  As a result, the question of industrial commercial property value is considered, especially after the historic run up in values over the past 10 years. People are asking, “what is the value of my property now, and what should I do with my building to generate the most revenue or wealth for me and my family?”  

​As we continue to keep you informed on the ever-changing landscape of commercial industrial real estate values and activity in the Southern California marketplace, we want to highlight one aspect that has caused some confusion and challenges over the past several years.  This aspect is the delta between what an investor would pay for an industrial warehouse property compared to what an owner-user would pay for the same property.   While this is somewhat nuanced, it is an important consideration because it will be a good indication of the health of a particular market.

​Opportunities are always present, if you know where to look and how to evaluate them.  As we embark upon 2023 we are certain there will be more exciting surprises in the world and our individual lives. But one area where we aim to minimizes surprises for you is in how the industrial real estate market is evolving. We are tracking activity in real time so that we can keep you informed on velocity and values, trends and opportunities. 
 

​The end of the year is here. This time of year always tends to be busy with the hustle and bustle of the holidays and I wanted to share a few thoughts with you during this season. No matter your race, religion, creed, age or stage of life, this is a time of year that is for reflection… the good, the hard, the unexpected, and the what’s to come. Even more important, it is time for friends, family and those close to you to enjoy a meal, good conversation, and some quality time, perhaps a little football too! Life moves at such a fast pace, especially here in southern California, so I hope that in this holiday season you have opportunity to slow down just a little and enjoy the simpler and yet significant things in life. There will always be time for shopping for presents, parties and events, to-do’s and checklists, but what really matters in life is relationships and sharing the time we have with those around us. I hope you have this holiday season to enjoy your relationships in your life, even the hard ones. 

​The activity of subleasing real estate space says much about the current state of the market. Subleasing is when you have term remaining on your lease, and you rent all or a portion of your space to another company who also become financially responsible for the rent until the expiration of the term. A ‘healthy’ supply of sublease space is an amount that gets rented quickly at rates close to market for similar non-sublease, or direct deal, space.  A ‘non-healthy’ amount of sublease space would be when sublease space sits longer than normal on the market and is renting for considerably lower than market rates for similar direct lease offerings.  Overall, the sublease market will demonstrate the health of the supply-demand fundamentals (the foundational rule for economic markets) within the region. When vacancy is low, the sublease market will be healthy and strong.

​Considering the sale of the business that you have poured so much of your energy into is more than just a dollars and cents decision.  The lifestyle and personal impact this will have on those involved must be carefully thought through.  Please note that we have growing relationships with several business brokers and investment bankers that we could introduce to you so that they can properly assess the value of the business.  However, for the sake of this article, we will focus on the economic impacts and opportunities that exist for the real estate owner in this scenario. We will assume that lifestyle and personal changes point to the right time for the sale of the business, and now it is about best positioning the investments you have built over the years to provide you the maximum return and financial flexibility.   

​Maintenance Responsibility
The maintenance of the property is always a hot button issue during lease negotiations. This presents an opportunity to understand the potential future liabilities that will be incurred during the term of the lease, and attempt to limit your exposure.  In a true Net, or triple net (NNN), lease the tenant is responsible for all maintenance to the property, including roof, structure and foundation.  In most Gross leases the tenant is responsible for all maintenance to the property except the structural integrity of the roof (not membrane), structure and foundation.  But as we indicated in Part I of this article, most leases are a hybrid variety where both landlords and tenants are looking for the other party to be responsible for specific maintenance items.  There are many compromises that can be agreed to.  The most important aspect for either party is to be clear on who is responsible for these items up front so that you can, as much as possible, understand  potential future liabilities. 

​When property is being marketed and leases are being negotiated, there is much discussion as to which lease structure to use, either Net or Gross. This discussion raises many questions as to the financial and operational implications for both landlords and tenants. While there are many implications we will cover here, let’s first take a look at these two terms and what they really look like  when negotiating a lease. 

​As we continue to navigate this tight real estate market while looking for warehouse space, we need to ask ourselves the question, “Is there a ”perfect” building?” Well, not to keep you in suspense, the answer is, ”sometimes.”  However,  sometimes finding the ”right” building is more important than waiting for the “perfect” building.  So let’s look at three relevant criteria to evaluate when it is time to move forward on the  ‘right” building, even if it is not the ”perfect” building. 

​If you have been presented with a proposal for an “Off-Market” transaction, defined as a transaction that is not presently listed on the multiple listing service(s), you, as either buyer, tenant or owner, must weigh the pluses and minuses of such a transaction.  In this article you will find insights to help you carefully consider this opportunity.