Warehouse Leases More Profitable Than Retail

In the property management business, industrial real estate is the most reliable and profitable in the San Fernando Valley. That’s the consensus from companies on the Business Journal’s annual list of Property Management Firms. Encino-based Illi Commercial Real Estate President Todd Nathanson summed it up by saying the industrial market is busy. “We’re definitely up to our elbows in industrial properties,” said Nathanson, referring to the Marks Portfolio, which comprises 350,000 square feet across 10 properties in North Hollywood and Van Nuys. “We’re going to be taking them to market to be sold (in early 2020).” Illi, No. 3 on the Business Journal’s list of Property Management Firms, manages multitenant, industrial spaces on larger properties, as well as several smaller tenants. “We’ve taken on six other parks as a focus,” he said of the office campuses scattered throughout North San Fernando Valley. Nathanson said that in the last year his Encino company has been nimble in its shift from the office to industrial sectors. “We already had a specialty in multitenant,” he said. “We’re just seeing many of our clients have traded out of retail into industrial properties.” However, he noted that the shift from managing retail properties to multitenant industrial isn’t as dramatic as it might seem. “It’s very similar to our background in the shopping center world,” he said. “From a management standpoint, the two are very similar. The demand for leasing is higher in the industrial world.” The company has also taken on its third mobile home park in Sylmar. “That’s been a whole new direction as well,” he said. Nathanson chalked up the robust leasing of warehouses to “supply and demand.” “On the investment side, there’s been a big demand for industrial properties,” he said. “Traditional industrial users in smaller industrial spaces are your average air conditioner, plumbing businesses,” Nathanson said. “A lot of these people’s work is involved in fabrication, tool and dye, or the aerospace industry.” The diversity that comes with taking on some new segments of the leasing market has worked for Illi. “Our property management has gone through substantial growth,” he added, pointing to his company hiring Sandra Sigman, who, before boarding Illi on Dec. 1, worked at Cushman & Wakefield (No. 6 on the Business Journal’s list) for eight years and Madison Marquette Real Estate Services for a decade previous. “She’s a veteran, she’s been in the business on assignment in Turkey – she’s been flown all over the world.” NoHo, Northridge retail While based in downtown Los Angeles, Charles Dunn Real Estate Services, Inc. has a significant presence on the list, ranking No. 10 on the Business Journal’s list of Property Management Firms. Chief Executive Patrick Conn and Regional Vice President Karina Beltran explained to the Business Journal that specific sectors of retail are strong, but overall the trend is toward less need for shopping centers or malls. “On a shorter trend, those communities that are more gentrified are fine,” Conn said, naming North Hollywood and Northridge as two examples of emerging submarkets and noting “increased activity in Woodland Hills” because of all the Warner Center 2035 Specific Plan-goaded building in that neighborhood. In retail development, mixed-use is faring well, as are experiential malls. Service- and food-related retail are doing well while mom-and-pop clothing and other merchandise stores are languishing in the face of Amazon.com Inc.-type e-commerce. On the food front, Conn’s theory has to do with too many vehicles on Valley roads. “Part of it is that our traffic congestion can be so difficult people in those communities want to dine locally,” he said. “Retail is going through more of a redevelopment,” Beltran added. “Industrial is very strong and picking up the strength retail used to have,” Conn said. “Retail is less favored; industrial has higher occupancy and higher rental rates.” With certain types of retail folding, “it could be an opportunity for other types of businesses,” Beltran said. Conn and Beltran added that Charles Dunn is thriving because of a strong overall economy that benefits the entire real estate business. “In the last two years, because employment is so strong, some of these owners are having a difficult time retaining their employees,” Conn said. “So, some of these owners are starting to outsource to property management firms.”